President Nicolas Sarkozy threatened to pull France out of the euro currency group to force Germany to help Greece with its debt crisis, El Pais newspaper reported Friday, quoting Spain's prime minister.
Spain, France and Germany all denied the report, but it increased investors' concerns over the euro single currency, which plunged to an 18-month low on Friday.
El Pais, which is close to Spain's ruling Socialist Party, said Sarkozy made the threat at a Brussels summit of EU leaders last week that sealed a rescue package for Athens.
Germany, Europe's biggest economy, has been the most reluctant euro nation to help the Greek government.
Spanish Prime Minister Jose Luis Rodriguez Zapatero reported Sarkozy's remarks to a meeting of leaders of his Socialist Party on Wednesday, El Pais said.
The French president demanded "a commitment by everyone, for everyone to help Greece, each according to his means or France would reexamine its situation in the euro," Zapatero was quoted as saying.
"Sarkozy banged his fist on the table and threatened to withdraw from the euro, which twisted the arm of Angela Merkel," the German chancellor, a Socialist official who heard Zapatero's account was quoted as saying.
The Brussels summit finally sealed a 110-billion-euro (140-billion-dollar) three-year package of loans and credit guarantees for Greece, which had risked defaulting on its huge debts.
"France, Italy and Spain put up a common front against Germany, and Sarkozy went so far as to threaten to break the traditional Franco-German axis," according to another person at the meeting. France and Germany are traditionally considered the central motor of EU initiatives.
A government source in Madrid denied the report, describing it as "lacking in any foundation" while deputy Prime Minister Maria Teresa Fernandez de la Vega told a news conference she had "no knowledge that this information is correct."
In Paris, a French presidential source said it was based on "totally unfounded rumours," and a spokeswoman for the German government said it was "devoid of all foundation."
Following the denials, a director of El Pais told AFP the "editorial management confirms the content of the article."
Spain and Portugal also face major debt problems and Zapatero announced new austerity measures on Wednesday.
El Pais said the Spanish leader has used increasingly dramatic rhetoric in recent days to convince his party of the gravity of the crisis facing the euro.