The European Union yesterday rejected US proposals for a transatlantic open skies agreement, arguing that the present offer did little to improve European access to the American market.

The two sides will continue negotiations, but the US has insisted it will not grant concessions sought by the EU, such as the right for its carriers to fly between US cities.

Unless the US moves further on market access, an agreement could be pushed back until after the US presidential elections in November.

The talks began last year amid hopes for sweeping liberalisation of the biggest aviation market. This would have included the right for European and US carriers to operate in each other's market and the lifting of restrictions on foreign ownership, which could have paved the way for transatlantic mergers.

But after a meeting of EU transport ministers in Luxembourg, European officials said that despite substantial progress the US offer fell short of expectations.

Few had believed that ministers would accept the US offer as a final deal, but there had been speculation that ministers would strike an interim deal and look for further concessions in a second round of negotiations.

Ms Loyola de Palacio, the EU transport commissioner who is formally in charge of the talks, said there had been progress on market access.

"But this is considered not enough," she added.

Ms de Palacio warned the US that in the absence of further progress US carriers would not be granted additional rights to fly between European cities.

Britain, which has been the loudest opponent of a quick settlement, cautioned that member-states should not be rushed.