British Prime Minister Tony Blair said it would be difficult to resolve differences over the EU's budget and called for a wider debate of the future direction of the bloc.
Following talks in Paris with French President Jacques Chirac, Blair said Tuesday that sharp disagreements remained over funding and spending plans for 2007 to 2013.
The two countries have been at odds in recent days, with Britain holding fast to its lucrative budget rebate from the EU and France unwilling to budge on hefty EU support to French farmers.
"Obviously there is a sharp disagreement. It is difficult to see these differences being bridged," Blair said, describing the talks with Chirac as "amicable." He said Britain was continuing its talks with the EU presidency, currently held by Luxembourg, over the rebate.
Blair has rejected pressure to accept a freeze on the rebate, setting the stage for a contentious summit of EU leaders in Brussels, Belgium, later this week.
Luxembourg has been pressing to resolve the rebate controversy before its presidency ends at the end of the month, but Blair insisted there was no rush.
"It is better to get the right deal than a slapped-together compromise that does not work," he said at a news conference at the British ambassador's residence. He said new budget rules would not take effect until 2007: "We do not have to do it now."
The French leader has been one of the strongest critics of the British rebate worth some ?3.1 billion (US$5.5 billion) a year.
Chirac told Blair that avoiding a dispute over the budget is important for Europe, according to his spokesman, Jerome Bonnafont.
"Amid the political crisis in which Europe finds itself, it is important not to add financial difficulties," Bonnafont quoted Chirac as saying.
Chirac said Europeans are looking to the summit today and tomorrow to show "a spirit of coming together and unity," and want EU leaders to demonstrate a "capacity to move forward."
France wants to reach "a reasonable and fair accord" on the EU budget in Brussels, "which assumes that everyone plays their part," said Bonnafont.
British officials said proposals by Luxembourg Prime Minister Jean-Claude Juncker to freeze the rebate would cost their country a total of between 25 billion euros and 30 billion euros over the 2007-2013 period.
"This is not some special thing that is being given as a special privilege to Britain -- it is a mechanism of correction of what would otherwise be grossly unfair," Blair said.
Addressing a sensitive subject in France, Blair said it was wrong to spend 40 percent of the EU budget on agriculture. He insisted more must be spent on research and technology, and science and development, to ensure that the bloc will remain competitive with emerging economies like India and China.
Blair also called for a period of reflection of some months over the EU constitution after it was rejected by voters in France and the Netherlands.
Blair said he continued to believe that the treaty was a "sensible set of rules" and insisted that it was unlikely now that any EU member states would back the constitution in a referendum.