European leaders warned on Monday that claims the U.S. National Security Agency (NSA) bugged European Union (EU) offices and hacked into its computer network could derail major trade talks, as the controversy over U.S. spying snowballed.
Germany's foreign ministry summoned the U.S. Ambassador to seek clarification and German Chancellor Angela Merkel will also discuss the issue with President Barack Obama, her spokesman said.
(Read More: US Bugged EU Offices, Hacked Into Its Computers)
"If it is confirmed that diplomatic representations of the European Union and individual European countries have been spied upon, we will clearly say that bugging friends is unacceptable," Merkel's spokesman said.
"We are no longer in the Cold War."
Reports published over the weekend by The Guardian newspaper and Germany's Der Spiegel, claimed the NSA had run an extensive program to spy on the EU representative's office in Washington as well as the EU office to the United Nations in New York. Der Spiegel also reported one spying operation had targeted an office that housed the EU Council of Ministers in Brussels.
The revelations threatened to derail an EU-U.S. free trade deal worth billions of dollars.
France's President Francois Hollande said Europe would hold off on any negotiations with the U.S. on the trade deal, until it was sure the U.S. spying had ended.
"There can be no negotiations or transactions in all areas until we have obtained these guarantees, for France but also for all of the European Union," Hollande said.
In a strongly worded statement, the chairman of the European Parliament's Economic and Monetary Affairs Committee said the spying allegations were a "disaster" ahead of the trade talks.
"Upcoming EU-U.S. trade talks will certainly be under strain in the wake of this scandal. There will be an enormous elephant in the room which will be impossible to ignore," said Chairman Sharon Bowles.
"I will be leading a delegation of my Committee to the U.S. in a couple of weeks and the issue of bugging is bound to come up. The last time I was in Washington I was briefed in a coffee shop, although this was due to a very early start. That said, it might now be safer to conduct all our business in coffee shops."
Stephen Booth, the research director of Open Europe, an influential think tank, said the politics of the issue could well be significant for the trade talks.
"Some of the EU countries allegedly targeted by U.S. agencies, such as France for example, have already been resistant to opening up trade in certain sectors and this could harden their stance in those talks."
But in a sign the allegations have not yet derailed the trade deal, European Commission (EC) spokesperson Pia Ahrenkilde Hansen said that rather than concentrating on the trade deal's future, the EC was "looking for a clear statement from our U.S. partners."
"These are disturbing reports if proven true and they demand full clarification," she said, adding that the EU's foreign policy chief, Catherine Ashton, had spoken to U.S. Secretary of State John Kerry about the allegations.
In the meantime, the president of the European Commission, Jose Manuel Barroso, has also ordered an "ad-hoc" security sweep of European premises and computer programs.
The latest leaks came from a "top secret" document that The Guardian and Spiegel, said they acquired from former NSA contractor Edward Snowden. The documents apparently revealed 38 NSA surveillance "targets", including European and international embassies, and EU offices.
"Partners do not spy on each other," Viviane Reding, vice-president of the European Commission and EU Commissioner for Justice, said on Sunday, at a meeting at the European Commission.
"We cannot negotiate over a big transatlantic market if there is the slightest doubt that our partners are carrying out spying activities on the offices of our negotiators. The American authorities should eliminate any such doubt swiftly," she added.
In the wake of the allegations, the Green parties in both France and Germany have called on their governments to offer asylum to Snowden. The U.S., which has charged Snowden with espionage, has put heavy pressure on foreign governments not to shelter him. Snowden is believed to be stuck in the transit area of Moscow airport, having fled from Hong Kong.
(Read More: How Long Can Snowden Stay at the Moscow Airport?)
Meanwhile, the EU's economic affairs chief, Olli Rehn, said he was "very saddened" by the reports and said the EU must first establish the facts before issuing a response.
'Goliath Will be Fighting Goliath'
European President Martin Schulz said that if the allegation were true, the U.S. was treating Europe as an enemy, not an ally.
"I'm shocked in case it is true. I feel, treated as a European and as a representative of a European institution, like the representative of an enemy. Is this the basis of a constructive relationship on the basis of mutual trust?" Schulz asked on Sunday.
The allegations have also fueled data protection concerns, already a thorny issue in Europe.
"Data protection is a fundamental right in the EU. I will fight for high data protection standards. The recent data protection scandals in the U.S. and the U.K. have been a wake-up call. In future, Goliath will be fighting against Goliath," Reding said.
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt