Tony Blair warned fellow European leaders today that he would only be prepared to discuss Britain's rebate as part of a radical rethink of the EU's finances – including scrapping massive subsidies for farmers.
And the Prime Minister said the "no" votes in France and Holland on the proposed EU Constitution showed voters believed the EU had not paid enough attention to their concerns.
Mr Blair delivered his blunt warning after talks with Russian president Vladimir Putin at his private dacha outside Moscow, and ahead of talks in Berlin later tonight with German Chancellor Gerhard Schroeder and with French President Jacques Chirac in Paris tomorrow.
Mr Blair said he would be "diplomatic but firm" with his fellow leaders in the run–up to a crunch European summit in Brussels at the end of the week.
The Prime Minister won broad backing from Russia for his twin G8 objectives of tackling climate change and boosting aid to Africa.
On his talks in Berlin and Paris, Mr Blair said: "I will be, as is my way, diplomatic but firm.
"The context for this discussion is one in which two countries have now voted against the European constitution. Why? Because people in Europe did not feel that sufficient attention was being paid to their concerns about Europe and its future.
"When we come to debate the future financing of the European Union, let us bear that in mind.
"We can't discuss the British rebate unless we discuss the whole of the financing of the EU, including that 40% of the budget goes on agriculture which employs only 5% of the people."
He asked whether a budget formulated in that way was the answer to Europe's problems in the 21st century and added: "I don't think that it is."
Mr Blair went on: "We are happy to have this discussion but it's got to be on a realistic basis and it cannot be on a basis that ignores the unfairness that gave rise to the British rebate."
He said there had to be changes "in particular to the agriculture policy and the amount of the budget it takes up every year".
At his joint press conference with Mr Putin, Mr Blair also gave a public explanation for his absence from the Russian commemoration on May 9 of the end of the Second World War – to which he sent his deputy John Prescott.
Mr Blair said: "For reasons that you appreciate, because the commemoration took place on May 9 shortly after the British election and I was preoccupied with deciding the new government, I was unable to attend that commemoration.
"But I would like to take this opportunity of paying my tribute to the courage and heroism and dedication of the Russian people and the Russian armed forces in the way that they resisted fascism and Nazism and therefore helped ensure that our generation lives in freedom.
"The co–operation between Britain and this country during the course of the Second World War was one of the main elements in bringing about the victory of the Allied Forces."
On his G8 objectives – the formal reasons for his visit to Russia, Germany and France – Mr Blair said he was optimistic about the progress made so far.
Mr Blair said there had been "a very broad measure of agreement" on the Gleneagles agenda although he warned there was still "hard negotiating" to come.
Mr Putin said: "We fully support the ideas put forward by the UK regarding the agenda of the upcoming meeting at Gleneagles."
Mr Blair added: "I think there's a real prospect of progress on Africa and on climate change. There's obviously still a lot of hard negotiating to do."
Mr Putin, who takes over the presidency of the G8 next year, said he wanted to bring to the world's attention the plight of states such as Kurdistan and Moldova, which were not officially recognised as heavily indebted poor countries.Reuse content