A key part here is "democracies". Between dictatorships, mutual spying to establish trust can be a reasonable policy. But a democracy has to factor in the opinion of their citizens. People tend to dislike foreign countries spying on them, and will create incentives for their government to distance themselves from such countries.

Even if you try to keep it on the down-low, it makes it really easy for a third country to drive a wedge in the relationship.