Britain's EU rebate threatened

BRITAIN'S annual European pounds 2.85bn rebate came under fierce attack from EU finance ministers yesterday, raising the prospect of a bitter dispute between the UK and its continental partners.

At a meeting of finance ministers in Luxembourg, Spain and the Netherlands made blunt calls for the refund to be capped or scrapped. France and Germany also called into question the UK's right to the unique benefit. That provoked a direct retort from the Chancellor, Gordon Brown, who told a press conference: "We are not prepared to reopen the principle of the rebate."

Gerrit Zalm, the Dutchfinance minister, told the Chancellor that "something must be done". He quoted a Dutch proverb: "When all the monks are of the same kind, they should all wear the same habit."

The French finance minister, Dominique Strauss-Kahn, later argued that, if net contributions were being discussed, the British rebate issue "must be on the table". Germany's outgoing minister, Theo Waigel, praised a European Commission report which questioned the UK's position.

Last week the Commission's report argued that four nations - Germany, the Netherlands, Austria and Sweden - were now in a worse position than Britain when Margaret Thatcher negotiated the rebate in 1984. It also argued that its continuance would prevent Britain shouldering its share of the burden of enlargement.