British Prime Minister Tony Blair emerged from talks in Paris with French President Jacques Chirac today to acknowledge a "sharp disagreement" over the future financing of the European Union.
At the British Embassy, the Mr Blair made it clear that a wide gulf remains between London and Paris over French demands for a review of Britain's €5.2 billion a year rebate on its EU budget contributions, and Britain's demand for wider reform of the EU budget focusing on subsidies to French farmers.
Mr Blair told journalists: "In respect of future financing, it is very difficult.
"You know the positions that the respective countries have had. There is no need to rehearse them.
"The meeting I have just had with President Chirac was immensely amicable. But obviously there is a sharp disagreement.
"I think it is difficult to see these differences being bridged, but of course we continue to talk to people including the presidency about it."
Mr Blair is only prepared to consider the matter as part of an overall review of EU spending, in particular the 40 per cent of the EU budget spent on the common agricultural policy (CAP).
Mr Chirac has ruled out renegotiating the current agricultural deal, which expires in 2013.
Mr Blair added that he detected a shifting mood in Europe, as a result of the troubled European constitution.
"In respect of the constitution, I am now more clear than ever before that it is right to have some pause for reflection before proceeding," he said.
"I believe it is possible that we could reach an agreement at the European Council (at the end of this week). I don't say it will happen but I think it is possible, and indeed I think it would be sensible if we agreed in view of the no votes in France and Holland that it was sensible collectively to come to the view that we should have this pause for reflection over a period of months so that we can give Europe the debate it needs and then the direction it needs on the key issues, the economy and globalisation, issues to do with security and crime.
"Although of course there is obviously respect for what individual countries want to do, I have noticed somewhat of a change in mood over the past 48 hours in how people are approaching this issue," added Mr Blair.
On the forthcoming G8 summit at Gleneagles, Mr Blair said: "In respect of Africa, I think there is a very substantial measure of agreement. I have just had an excellent and constructive meeting with President Chirac on the G8.
"I think there is a very very great coming together of people's views on that. I believe it is possible, I don't put it higher than that, that we could get good outcomes both for Africa, and for significant progress on climate change at the G8. But there is a lot of negotiating still to do."
PA