Frank-Walter Steinmeier, the foreign minister, said on Friday Baghdad-based agents of the BND intelligence service had stuck to clear instructions not to pass on operational military information to the Americans at the start of the US invasion in 2003.
The role of the two agents has become a hot political topic since media reports this month alleged they gathered information for Washington on bombing targets in Baghdad and acted as scouts for an air raid intended to kill then-president Saddam Hussein.
Steinmeier said the inquiry opposition parties want would be a time-consuming and distracting attempt to discredit the former government of Gerhard Schroeder, which angered Washington at the time with its vocal opposition to the war.
"What I fear is that, for a year or even longer, we would help to make anti-Americanism and rejection of Nato acceptable in this country again. We should not allow that," he told parliament in a special debate on the affair.
Steinmeier has come under pressure because, as chief of staff under Schroeder, he was responsible for overseeing intelligence and security services at the time.
In a positive sign for the government, the three opposition parties pressing for an inquiry have yet to agree on its terms, and spent much of Friday's debate arguing among themselves.
Fischer's party wants to know if
agents exceeded their powers
The Greens, whose most prominent leader Joschka Fischer was foreign minister in Schroeder's coalition government, want to focus the investigation on whether members of the security services exceeded their powers. Fischer himself opposes the idea of a parliamentary inquiry.
The liberal FDP has raised wider questions about the policy of the government and whether it knowingly gave Washington secret intelligence help while publicly opposing the war to win votes.
The opposition has also called for further investigation into the case of Khaled al-Masri, a German who was secretly flown by the US to Afghanistan and jailed there for nearly five months in 2004 while being questioned as a terrorism suspect. He was later freed for lack of evidence.
Guido Westerwelle, the FDP leader, said in response to Steinmeier's comments: "Imagine the German secret service had kidnapped a citizen in America, mistreated him and taken him to a foreign country for five months. And then a member of parliament or minister came and said: 'We don't want to talk about that in public, it could annoy the Europeans.' He'd be sent home in shame and disgrace."
Party leaders will meet on Monday to discuss their next move towards a possible inquiry into the Iraq and al-Masri affairs.