European leaders said Friday they want a new deal with Washington to end a damaging spy row so as to keep an essential alliance and the fight against terrorism on track.

The aim should be to agree rules for intelligence gathering rather than seek a pointless confrontation, Belgian Prime Minister Elio di Rupo said.

"The objective must remain the same - to fight against terrorism but also respect privacy," Di Rupo said as he arrived for the second day of an EU leaders summit which has been dominated by revelations of US spying operations across Europe.

"Everyone can understand the need for exceptional measures given the danger of terrorism ... but we are not in the position where we should spy on each other," he said.

Meanwhile, Spanish Prime Minister Mariano Rajoy said Friday he would call in the US ambassador to Madrid to explain reports of American spying on the country, a close ally of Washington.

France and Germany are to try to reach an understanding with Washington by year's end on intelligence gathering.

A statement approved by all 28 EU leaders, including Britain which has tight intelligence links with the United States, noted "the close relationship between Europe and the USA and the value of that partnership."

This must "be based on respect and trust," a lack of which "could prejudice the necessary cooperation in the field of intelligence gathering."

EU leaders "stressed that intelligence gathering is a vital element in the fight against terrorism," the statement added.

Revelations of US covert surveillance, topped by reports German Chancellor Angela Merkel's mobile phone had been tapped, have sparked outrage in Europe.

"Spying between friends, that's just not done," Merkel said. "We need trust between partners and such trust needs to be re-established," she said.

The growing scandal has embroiled US President Barack Obama in embarrassing exchanges with key allies - from France and Germany to Brazil and Mexico.

AFP