PARIS (AFP) –  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.