French president Francois Hollande has warned Washington that allegations of its spying on its allies threaten talks on a crucial free trade pact, despite US efforts to play down the row.
European sources said anger over the alleged bugging of EU offices was genuine,
and warned the scandal could escalate into a "serious" political crisis.
The crisis comes as Washington and the EU are set to begin sensitive talks next week on the biggest free trade deal ever negotiated.
US Secretary of State John Kerry's insistence Monday, that information-gathering was "not unusual", did little to stem increasing European fury.
Hollande called on Washington to immediately put an end to spying on EU diplomatic missions.
His was the first direct response by a European head of the state to the scandal.
Hollande said Paris had demanded answers from Washington, about reports that the US National Security Agency (NSA) bugged European offices and embassies.
"We cannot accept this kind of behaviour between partners and allies," he told journalists during a visit to the western city of Lorient.
"We ask that this immediately stop," he added.
"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."
Earlier, Kerry told reporters at a security forum in Brunei that he was looking into the allegations, but he also suggested that the spying was business as usual.
"I will say that every country in the world that is engaged in international affairs, of national security, undertakes lots of activities to protect its national security and all kinds of information contributes to that," he said.
"All I know is that is not unusual for lots of nations," he added, declining further comment until he had all the facts.
Travelling with president Barack Obama on a tour of Africa, US Deputy National Security Advisor Ben Rhodes also declined direct comment on the spying allegations but said relations with Europe would remain strong.
"We are going to cooperate with them on security issues, on economic issues and frankly we obviously also share a set of democratic values with them that I think can transcend any controversy."
In fresh revelations attributed to fugitive leaker Edward Snowden, a former NSA contractor now holed up at Moscow airport, Monday's Guardian newspaper said France, Italy and Greece were among 38 "targets" of spying operations by US intelligence services.
This followed Sunday's report in German weekly Der Spiegel, detailing alleged covert surveillance by the NSA on EU diplomatic missions in Washington; their mission to the United Nations in New York; even in the 28-member bloc's Brussels headquarters.
German government spokesman Steffen Seibert said Berlin had conveyed its "astonishment" and "great displeasure" to the White House about the allegations.
"Europe and the United States are partners, are friends, are allies. Trust must be the basis of our cooperation and trust must be restored in this area," he told reporters. "This is not the Cold War anymore."
European Justice Commissioner Viviane Reding has already said the trade talks could be in jeopardy.
The EU could not negotiate "if there is any doubt that our partners are bugging the offices of European negotiators", she said.
European Commission chief Jose Manuel Barroso's office said he had ordered a full security sweep of all its premises worldwide.
And one European Union source said officials could not simply brush the allegations aside.
"This goes far beyond the requirements of national security," said the official, speaking on condition of anonymity.
"It is a breach of trust and we are at the beginning of something very serious."
Germany and France both said the US ambassadors to their countries had been invited to discuss the issue.
But neither capital officially summoned the envoys -- a formal diplomatic move when tensions develop between governments.
Ecuador's President Rafael Correa said the allegations of bugging, if true, would reveal "the biggest espionage case in the history of humanity".
He added "an explanation must be given about what happened, measures must be taken so that this never happens again and those responsible must be punished".
Ecuador has not ruled out granting Snowden asylum, despite a direct request from Washington not to do so.
WikiLeaks meanwhile released a list of 21 countries to which it had submitted asylum requests on behalf of Snowden.
They included EU members Austria, Finland, France, Germany, Italy, Ireland, the Netherlands, Poland and Spain.
"I guess we can add every EU country to Snowden's list of possible asylum destinations," one Twitter user posted.
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