The row threatened to reverse progress made by Spain during its European presidency in bringing Latin America and the EU together for wider economic and trade collaboration.

Closer EU-Latin American trade ties, for long considered a prize desperately sought by South American countries, are now seen as a potential panacea for debt-ridden Europe as it looks to ease the burden of Greece-related credit woes.

Amid rising clamor in Europe on the union's slide into severe cash troubles, support for clinching a deal with South America grew during June, despite protests from European producers fearful of cheap Latin imports.

Spain and other pro-Mercosur European negotiators argued that South America's vast markets offered EU exporters opportunities they could not hope to exploit anywhere else amid the continuing global downturn.

At Spain's insistence the first round of Mercosur-EU talks opened in Buenos Aires this week.

But now the deal is going sour, analysts said, partly because of European anger over "secret" Argentine curbs on European food imports.

Nor are the Argentine trade barriers, apparently all unofficial and not even on paper, secret any more, as a seething group of European negotiators in Buenos Aires was at pains to point out.

Joao Aguiar Machado, the Portuguese deputy director-general for EU external relations, warned Argentine tactics could indefinitely delay progress toward clinching a Mercosur-EU pact.

It was the clearest hint yet that Europe was poised to hit back at Argentina by finding a linkage between its behavior on a bilateral level and the direction of Mercosur talks that could affect all of the trade pact's vast constituency.

South America's premier trading bloc, with its upwardly mobile consumer classes in a combined population of half a billion people, is a lucrative market for hard-pressed Europe.

Mercosur members Argentina, Brazil, Paraguay and Uruguay account for a combined population of more than 242 million, while associates Bolivia, Chile, Colombia, Ecuador and Peru and member-in-waiting Venezuela make up the rest.

Aguiar warned that Argentine curbs on food imports from Europe were eroding confidence in the whole gamut of bilateral talks and regional talks on Mercosur. He said the United States and other members of the World Trade Organization could also feel affected by Argentine measures.

"We fear this issue could contaminate the spirit and atmosphere of discussions," said Aguiar.

Argentine Secretary for International Trade Alfredo Chiaradia said the Mercosur-EU talks were not an appropriate forum for talking about a bilateral issue. But Aguiar said at issue was openness and transparency without which the bilateral issues would impact on the Mercosur region.

European delegates said Argentine restrictions on food imports do not exist on paper and President Cristina Fernandez de Kirchner and several ministers denied their existence.

Aguiar said he was aware of "impairing devices." Containers bearing food imports from Europe are blocked in Argentine ports, he said, adding "there is no way denying this."

He said the curbs affected Italian pasta, olive oil, rice, high quality cheese, different infusions and Greek peaches.

He cited the example of an Argentine company that was losing $5 million a month because more than 100 of its containers were blocked in the ports.

Unless the bilateral trade issue was resolved, he said, there could be complications in holding the next round of Mercosur talks.

At least 10 EU countries led by France still oppose a Mercosur pact that will give cheaper South American agricultural produce access to European markets. Farmers in Belgium, France and Ireland already face cuts in subsidy programs.

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