The Iraqi man, described by his landlord as "helpful but crazy," had administered an Internet chat room where he supported terrorist ideologies and even tried to recruit new personnel for al-Qaida, officials said.

Police had surveyed him for more than a year and found that he downloaded and disseminated audio and video messages by al-Qaida bosses Osama bin Laden and Ayman al-Zawahiri. Officials said he likely didn't have direct contacts to al-Qaida, but what he shared with the terror network was a profound hatred against the United States and the West, hatred that he discharged onto the Web.

Rolf Tophoven, a German terrorism expert, recently told United Press International that the Internet, used for "propaganda and inciting purposes," has become the Islamists' most important recruitment tool.

"The Web has turned into something like the University of Jihad -- it has become a virtual self-service shop of Islamist terror," he said.

Officials in Berlin agree. Wolfgang Schaeuble, Germany's interior minister and thus the top security chief, has long called for closer monitoring of the Internet.

Last week's arrest was preceded by a failed train bombing, when two men placed homemade bombs on two regional trains. They had found the plan to build the explosive devices on the Internet, and although the bombs failed to detonate, the attempt shook Germany's intelligence community to the core, as both individuals had not previously appeared as terror suspects.

In recent months, more and more videos have popped up online that have German subtitles, to spread the jihadist messages for converts with little to zero knowledge of Arabic, but a large potential for violence.

In an update of the country's anti-terror laws, lawmakers gave Schaeuble some $165 million to improve the war against online terrorism. Observers say this funding was much needed: While federal police and intelligence agents already comb through the Web on the lookout for terror propaganda, the number of Islamist Web sites has grown exponentially in recent months.

The money, the German news magazine Der Spiegel writes in its latest issue, may result into new computers and the creation of an additional 50 jobs assigned to survey the Web.

According to Spiegel Online, Schaeuble as early as the beginning of this year has asked his experts to develop a concept for a new department of Berlin's Anti-Terror Center, a federal institution designed to combat terrorism in Germany. The new department will be called Center for Internet Monitoring and Analysis and will go live in 2007, the magazine wrote.

Germany reportedly wants to cooperate with other countries (mainly with the United States and its western European partners) to fight online terrorism.

"More than before and at best round the clock we have to know what happens in Islamist forums, analyze hints for developments and try to arrest possible disseminators of propaganda in Germany," August Hanning, the deputy interior minister, told the magazine.

Some lawmakers even want to go a step further. Uwe Schuenemann, the conservative interior minister of Lower Saxony, wants Web site providers to sign guarantees that they take terrorism-related material off their servers. He also calls for outlawing the download of terrorism videos.

Ingo Wolf, the Free Democrat interior minister of North-Rhine Westphalia, wants to enable law enforcement agents to not only survey terrorism suspects who go online, but also access their hard drives, according to Der Spiegel, via spy ware or similar programs.

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