TEHRAN - French President Emmanuel Macron has accused the Australian Prime Minister Scott Morrison of out-rightly lying to him over a cancelled $90bn submarine deal, marking fresh escalation of tensions between the two countries.

Macron made these remarks during an impromptu interaction with Australian journalists on the sidelines of the G20 summit in Rome.

"I have a lot of respect for your country. I have a lot of respect and a lot of friendship for your people,” the French leader told the journalists. “I just say when we have respect, you have to be true and you have to behave in line and consistent with this value.”

The two leaders met for the first time in Rome since Australia scrapped a multi-billion dollar submarine deal with France as part of a new security alliance with the U.S. and Britain (AUKUS) announced in September.

"I think what happened was, to use an English phrase, what we did was clumsy." the U.S. president said.

After Australia cancelled the lucrative deal, Paris recalled its ambassadors from Washington and Canberra, claiming that France had been "stabbed in the back".

When asked by reporters whether he thought the Australian Prime Minister had lied to him by hiding Australia’s clandestine dialogue with the UK and U.S. over the procurement of nuclear submarines, Macron reply was terse: "I don't think, I know."

Macron, who has made no secret of his growing exasperation with former allies, during the summit said more efforts were required to restore the lost trust and confidence.

Morrison, speaking at a media conference later on Sunday, claimed he had not lied to Macron, insisting that he explained to the French president that the French-built diesel submarines would not meet Australia's strategic needs.

"I was very clear that what was going to be provided to us was not going to meet our strategic interests, and there was still a process we were engaged in, and we then engaged in, over the months that followed. And then we communicated to him (Macron) our ultimate decision," Morrison said.

Morrison said he understood Macron’s disappointment and that his administration has begun to fix relations with Paris on projects of shared interest, while hastening to add that "these things take time."

Striking a conciliatory tone, U.S. President Joe Biden on Friday said he was under the impression that France had been informed of the contract cancellation before the AUKUS pact was announced.

Biden said the way the U.S. and Australia had moved against France was "clumsy" and they should have carried out the deal with more "grace'.

"I think what happened was, to use an English phrase, what we did was clumsy. It was not done with a lot of grace," the U.S. president said.

Biden said France was America's oldest and most loyal ally, giving Macron verbal assurance that Washington valued its relationship with Paris as a close partner.

Macron, on his part, dismissed Biden's comments as worthless lip service, saying that Washington and Canberra needed to prove their trustworthiness.

Macron said that the allies needed to regain Paris' trust through their deeds, not words.

Under the Aukus pact, Morrison dumped a contract with France to build 12 diesel-powered submarines in favor of a deal with the U.S. for at least eight nuclear-powered submarines. France said it had been “betrayed”, “stabbed in the back” and “deceived”.

The escalation in tensions comes before a meeting between Australia’s foreign minister, Marise Payne, and her French counterpart designed to get the relationship back on track.

The dispute with France dominated Morrison’s trip to Rome for the G20 summit. Shortly after Morrison had arrived in Italy, Joe Biden moved to repair his own damaged personal and political relationship with Macron by acknowledging that the Aukus announcement had been a “clumsy” episode handled with a lack of grace.