Luxembourg's Prime Minister and Finance Minister, Mr Jean-Claude Juncker, has warned that the chances were "disappearing" of European Union members reaching a compromise about the long running dispute over the taxation of savings. The issue is due for discussion at next month's summit of EU leaders in Portugal.

Speaking as a high level group of officials in Brussels failed to make progress towards resolving the savings tax issue, Mr Juncker made clear he held Britain responsible for the impasse.

He recalled that in 1997 EU member-states agreed a "co-existence" model for taxing savings income by which member-states could either levy a withholding tax on income from non-resident savings or exchange information about such income. This model recognised the right of states such as Luxembourg to have banking secrecy, he stressed.

"We expected the EU to take account of the decision taken in 1997. But the UK did not respect it," he said. Britain's insistence that information exchange and the end of banking secrecy were the only way to ensure taxation of savings had distorted the EU's original goals, he implied.

Mr Juncker did "not accept" that banking secrecy should be abolished in Luxembourg. He drew a distinction between "reasonable" banking secrecy as existed in Luxembourg and "unreasonable" banking secrecy which aided crime.

At yesterday's meeting of officials in Brussels, Luxembourg, backed by Austria, Belgium and Greece, resisted strongly British calls for a "sunset" clause that would set a time limit to banking secrecy in any eventual EU savings tax directive.