Then why isn't Merkel demanding the same?

Because she is actually in power and would have to live with all the repercussions. Oppositional politicians don't have that problem and can talk all day long about what the people like to hear.

This is exactly why all of Obama's pre-election rhetoric about privacy is coming back to haunt him now. It's easy to sell "change" when you don't have to implement it.

It also helped that Obama's opponents didn't have a snow flake's chance in hell to convince the voters they would change these issues...

Traditional "Merkelian" politics is basically...wait until stuff blows over and let others make a fool of themselves. Same policy that Kohl followed ("Aussitzen") :)

I think this has some potential of losing her the elections though. Mostly because it seems the Greens will gain most from all of this.

Because she is from a conservative party which is more or less "okay" with surveillance.

She is not saying the same because she wants to play conservative and differentiate herself from the Greens/Left Party and SPD.

More or less is inaccurate. They are pushing strong surveillance acts. In fact just today the "Bestandsdatenauskunft" was made law. The law means, “that police and intelligence services will in the future be allowed to obtain extremely personal information about mobile phone users, and do so with the press of a button and without having to face any major legal hurdles”.