Australian prime minister Scott Morrison has denied that he lied to French president Emmanuel Macron while secretly negotiating a submarine deal with the US and UK.

The accusation by the French leader has escalated a rift over Australia’s surprise cancellation of a £48 million deal for French submarines.

Mr Morrison’s deputy Barnaby Joyce suggested France was over-reacting, saying: “We didn’t deface the Eiffel Tower.”

In September, Australia dropped the five-year-old, 90 million Australian dollar (£48 million) contract with majority French state-owned Naval Group to build 12 conventional diesel-electric submarines.

Instead, Australia made an alliance with the UK and the US to acquire a fleet of eight nuclear-powered submarines built with US technology.

Italy G20 Summit leaders
Australia’s PM Scott Morrison, German chancellor Angela Merkel, Italy’s prime minister Mario Draghi, French president Emmanuel Macron and UK Prime Minister Boris Johnson pose in front of the Trevi Fountain during the G20 summit (AP)

Mr Macron told Australian reporters on Sunday in Rome, where both leaders attended the G20 summit, the new alliance was “very bad news for the credibility of Australia and very bad news for the trust that great partners can have with Australia”.

Answering a reporter’s question about whether he thinks Mr Morrison lied to him, Mr Macron replied: “I don’t think, I know.”

Mr Morrison, who was also in Rome, said he did not lie to Mr Macron, while senior Australian government ministers criticized the French leader for escalating the dispute through the personal slight.

“We didn’t steal an island, we didn’t deface the Eiffel Tower, it was a contract,” Mr Joyce said in the Australian capital.

“Contracts have terms and conditions, and one of those terms and conditions and propositions is that you might get out of the contract. We got out of that contract,” Mr Joyce added.

Mr Joyce’s office could not say whether “steal an island” was a reference to the English Channel’s tiny Sark Island, which unemployed French nuclear physicist Andre Gardes attempted to overthrow with an assault rifle in 1990.

Emmanuel Macron
What was seen as a personal slight against Mr Morrison by the French leader has escalated the row (AP)

The bizarre event inspired the 2013 movie, The Man Who Tried To Steal An Island.

Cabinet minister David Littleproud described Mr Macron’s criticism of Morrison as “unreasonable”.

Mr Morrison could not reveal that the United States had offered Australia nuclear-propulsion technology when the pair dined together in June for national security reasons, Mr Littleproud said.

“I was very clear that the conventional submarines were not going to be able to meet our strategic interested,” Mr Morrison said.

Mr Macron had refused to take Mr Morrison’s phone calls after the submarine furore broke until hours before the Australian leader was to fly to Rome last week.

Scott Morrison and Boris Johnson
Mr Morrison and Boris Johnson (AP)

The pair did not hold a bilateral meeting in Rome, but Mr Morrison said they had “spoken several times” and would likely do so more in the coming days.

Both leaders will attend the UN climate summit in Glasgow, Scotland, this week.

US president Joe Biden told Mr Macron last week that the US had been “clumsy” in its handling of the Australian submarine alliance.

Mr Biden said he thought Mr Marcon had been informed long before the deal was announced.

Asked by a reporter if Australia could have “handled it better,” Mr Joyce replied: “With hindsight.”

He then drew an analogy to the Melbourne Cup, Australia’s best-known horse race, which will be run on Tuesday.

“If only I could put a bet on last year’s one, geez, I’d make some money,” Mr Joyce said.