The EU's Foreign policy chief spent the weekend negotiating a free trade deal with Bahrain.

But Catherine Ashton's visit was somewhat over-shadowed by events that could affect a much bigger trading partnership.

The European Union wants an explanation from the US, after a German magazine reported that America's spy agency had tapped EU offices.

(Soundbite) (English) EU Commission spokesperson, Pia Ahrenkilde Hansen, saying:

"These are disturbing news if proven true, they demand full clarification. Let me state clearly that clarity and transparency is what we expect from our partners and allies, and this is what we expect from the United States."

Germany and France have also called for a full explanation.

And the mood appears to have changed since Obama visited Berlin last month.

The talk then was of friendship and co-operation.

Now Angela's Merkel's office is using far frostier rhetoric.

(Soundbite) (German) Chancellor Angela Merkel's Spokesman, Steffen Seibert, saying:

"It has to be cleared up. And if it turned out to be true that it would be unacceptable. We are no longer in the Cold War."

Some are wondering whether eavesdropping could have given the US an advantage during a recent meeting about the trade deal.

Several policy makers have even called for talks to be put on ice while the issue is clarified.

For now, markets don't seem too worried.

But trillions of dollars are potentially at stake if the biggest bilateral trade deal in history does not go ahead - investors are watching developments closely.

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July 3, 2013 7:51 pm

Backstabbing friends is the true face of USA. Imagine what they have been doing to Pakistan.

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