Britain has rejected a new proposal by the European Union presidency to freeze its EU budget rebate, saying any change must be linked to reform of the bloc's farm subsidies.
"It's clear that what the presidency is proposing doesn't clearly establish that link between any change to the rebate and reform of the budget, and the CAP (Common Agricultural Policy) in particular," Prime Minister Tony Blair's spokesman said.
Speaking after Mr Blair had a private meeting with Luxembourg Prime Minister and EU president Jean-Claude Juncker, he said the plan also contained an unacceptable request for additional funds from Britain.
Britain did not expect to have to use its veto because other countries also had problems with the compromise proposal, put forward on the second day of a crisis summit, he said.
French President Jacques Chirac is reportedly ready to accept a freeze of Britain's rebate from the European Union budget instead of a reduction if it led to an overall budget deal, an aide claimed this evening.
That appeared to improve chances of a compromise on the 2007-13 budget since Paris had previously insisted that Britain's annual refund, won by Margaret Thatcher in 1984, must be phased out.
"A freeze is not enough, but if it is a compromise, like all compromises, we'll have to accept that it doesn't make everyone happy," an aide to the president told reporters at a summit.
British officials earlier rejected proposals by Mr Juncker to peg the rebate at its pre-enlargement level of €4.6 billion a year for the next seven years.
The French aide said Mr Chirac had clashed with Mr Blair during the summit when the British leader argued that farm spending was old-fashioned and that the EU should target its resources at more modern priorities.
The budget clash came after leaders decided yesterday to allow more time to ratify the new EU constitution, rejected by French and Dutch voters and declared dead by its critics.
That decision prompted Denmark, Portugal and Ireland to say they would postpone referendums due later this year.
Earlier today the Taoiseach, Bertie Ahern, said "the constitution treaty is going to move ahead, in those countries that are having ratifications by Parliament, it will proceed, that will bring it to 18 or 19 countries very quickly."
He also said that he was going to proceed with the publication of the White Paper on the EU constitution by early September.
"We can have the referendum whenever we think is the right time, obviously I will consult the Opposition Parties who support this in any decision on the timing," Mr Ahern said.