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France, Finland Quarrel Over EU-U.S. Trade Amid Spying Charges

July 1 (Bloomberg) -- Hans Nichols reports on the status of NSA leaker Ed Snowden who is seeking asylum in Ecuador. Nichols reports on Bloomberg Television's "Market Makers." (Source: Bloomberg)

European Union countries quarreled over next week’s planned start of trans-Atlantic free-trade talks following a report that the U.S. eavesdropped on EU diplomats and snooped on computer traffic.

French President Francois Hollande sought “guarantees” that the U.S. halt the spying, alleged by Germany’s Der Spiegel magazine. Northern European countries lobbied for the talks to go ahead while the European Commission, the EU’s trade negotiator, sought to keep trade and espionage separate, at least for now.

“What are the consequences to draw? That it stop as quickly as possible, that is immediately,” Hollande said during a visit to Brittany in northwestern France. “We can have negotiations and transactions only once we have these guarantees.”

Hollande has already put up potential hurdles to a trade accord, which the EU estimates could pump an annual 119 billion euros ($155 billion) into its crisis-hit economy. France got an EU guarantee last month that protections for its film industry won’t be bargained away.

As politicians across Europe expressed outrage at Der Spiegel’s allegations, which drew on classified documents in the possession of former National Security Agency contractor Edward Snowden, the EU’s traditional backers of free trade moved to prevent the trans-Atlantic talks from being sabotaged.

Photographer: Kristoffer Tripplaar/Pool via Bloomberg

U.S. President Barack Obama, right, during a meeting with French President Francois Hollande at the White House in Washington, D.C., on May 18, 2012. Close

U.S. President Barack Obama, right, during a meeting with French President Francois... Read More

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Photographer: Kristoffer Tripplaar/Pool via Bloomberg

U.S. President Barack Obama, right, during a meeting with French President Francois Hollande at the White House in Washington, D.C., on May 18, 2012.

“It would be very disadvantageous for Finland should the negotiations be jeopardized. The free-trade agreement lowers trade barriers, which is very important for an export-driven country like Finland,” Finnish Prime Minister Jyrki Katainen said today in Helsinki. “I hope the incident has no effect on the agreement.”

Trade Talks

Following a declaration by the two sides at last month’s Group of Eight summit in Northern Ireland, negotiations on the Transatlantic Trade and Investment Partnership are slated to start July 8 in Washington. Pia Ahrenkilde Hansen, a spokeswoman for the Brussels-based commission, didn’t call that date into question today, telling reporters that “we are focused on the issue at hand, which means clarification from our American partners.”

Standard EU practice is for national governments to outsource the conduct of trade talks to the commission, the bloc’s executive arm. While it has wide latitude over the day-to-day negotiations, ratification is in the hands of the governments and the European Parliament.

‘Strategic Partnership’

Lithuania, which took over the EU’s six-month presidency today, doesn’t want to see “our strategic partnership and including the momentum for TTIP” affected by “the present situation,” Raimundas Karoblis, Lithuania’s ambassador to the EU, told reporters in Brussels.

Der Spiegel said the NSA set up electronic surveillance of EU diplomatic missions in Washington and New York, infiltrated computer networks and described the 28-nation bloc as a “target.”

White House Press Secretary Jay Carney and Deputy National Security adviser Ben Rhodes both declined to comment on the report. U.S.-European ties “are going to stay strong,” Rhodes said, speaking to reporters on Air Force One en route to Tanzania.

German Chancellor Angela Merkel, who grew up in communist East Germany where the Stasi secret police snooped on citizens, discussed the program known as Prism with President Barack Obama during his visit to Berlin in June. She may raise it with Obama again soon, her spokesman Steffen Seibert said today in Berlin.

‘Absolutely Unacceptable’

“We aren’t in the Cold War anymore,” Seibert said at a news conference. “If it’s true that diplomatic missions have been spied on, it would be absolutely unacceptable for us.” The German Foreign Ministry “invited” the U.S. ambassador in Berlin to discuss the matter with a senior official today, spokesman Martin Schaefer said.

While ties between Merkel and Obama are close and the German government “warns against calls” to adjust relations with the U.S., data gathering to combat terrorism must be balanced with Europeans’ privacy rights, Seibert said.

“Indignation aside, what we in Europe need right now is clever diplomacy,” Wolfgang Bosbach, chairman of the all-party interior committee in the lower house of parliament and a member of Merkel’s Christian Democratic Union, said in a phone interview. “A display of toughness or even threats won’t get any results with the Americans.”

Hollande said he’s asked Foreign Minister Laurent Fabius to contact U.S. Secretary of State John Kerry and the U.S. ambassador to France “to seek all explanations.” Kerry said at a press conference in Brunei, that EU foreign policy chief Catherine Ashton raised the bugging allegation in a meeting today.

“I agreed to find out what the situation is and I will get back with her,” Kerry told reporters, adding he had no direct knowledge of the matter reported by Der Spiegel.

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net Rainer Buergin in Berlin at rbuergin1@bloomberg.net;

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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