BRITAIN’S European Union partners stepped up their pressure on Tony Blair last night as he prepares to defend the country’s multimillion-pound budget rebate at next week’s Brussels summit.

Other EU leaders are hoping to put the damaging political setbacks of the draft European constitution’s rejection by the French and Dutch electorate behind them by forcing a showdown with Mr Blair over a seven-year spending plan for the EU worth more than €800 billion (£540 billion).

Jean-Claude Juncker, the Prime Minister of Luxembourg, said that he would press for a deal at the summit and he sent EU finance ministers home yesterday urging them to convince their premiers of the importance of reaching a long-term budget settlement. “In the eurogroup, we all had the feeling that after the major difficulties that Europe has had in the last few weeks, it would be advisable to reach an agreement on the financial perspectives (the seven-year budget) at the council next week,” he said, referring to Monday night’s meeting of ministers from the 12 single-currency countries.

The key to any deal for EU expenditure between 2006 and 2013 will be the future of Britain’s annual rebate, worth £3 billion. The Government has said it will defend the financial arrangement secured by Margaret Thatcher in 1984. Gordon Brown, the Chancellor, refused to discuss the budget battle, except to say: “We would be prepared to use the veto if necessary to protect the rebate.”

With 24 governments now opposed to the terms agreed at Fontainebleau over two decades ago, however, there are increasing demands that the rebate be frozen at its existing level or even reduced. If the complex budgetary package falls at the final hurdle because of the rebate, Mr Blair could find himself being targeted for the failure days before taking over the EU’s six-month presidency.

Mr Juncker will be holding a series of private one-to-one sessions with European leaders. His last meeting will be with Mr Blair on Tuesday before he tables a final negotiating package on Wednesday evening just hours before the summit opens.

Hans Eichel, the German Finance Minister, said: “An agreement is desirable, but it has to be reasonable. Either everyone moves or we won’t have an agreement.”

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