Germans need to overcome their traditional fear of the large-scale collection of personal data by companies and instead embrace its opportunities or risk being marginalized in the global economy, Chancellor Angela Merkel said on Tuesday.

In a marked shift in tone by Germany, one of the most vocal critics of the practices of U.S. web giants such as Google, Merkel urged the so-called Mittelstand of family-owned companies in particular not to be left behind.

"As anything but a digital native, rather in the best case a beginner digital migrant, I know what it means to have to adapt to this new world at an advanced stage of life," Merkel, 60, told a conference of business leaders in Berlin.

Mittelstand companies, the backbone of Germany's economy, are often run by older family members whose offspring do not want to follow in their footsteps.

"Whoever sees data as a threat, whoever thinks about every piece of data in terms of what bad can be done with it, will not be able to take advantage of the opportunity of digitization," Merkel told an audience that included Google's Executive Chairman Eric Schmidt.

Merkel stressed she was not only referring to the increasing web-connectedness of traditional industry, dubbed "Industrie 4.0" in Germany, but the gathering of individual data to create personalized products that is so controversial in Germany.

Many German citizens hold visceral fears about the risks of exposing data to governments or corporations, with memories still fresh of mass data collection and spying by the East German state security service, the Stasi.

Yet industry leaders ranging from banks to car makers to publishers like Axel Springer, itself a major critic of Google, are beginning to analyze their customer data in earnest to spot trends and secure their future.

"Many jobs will disappear because they can be replaced by machines," said Merkel. "But I'm convinced that many more jobs will be created through the value of data."