European Commission President Jose Manuel Barroso on Monday refused new budget proposal by the United Kingdom, saying it is "unacceptable" and unfair to new member states.
"The UK Presidency proposal is unacceptable. It is simply not realistic," said Barroso in a statement.
Earlier on Monday, Prime Minister Tony Blair's government unveiled its budget proposal, which cuts development aid to the 10 poorer member states but makes it easier for them to get the money.
Meanwhile, Toney Blair, whose country holds the rotating European Union (EU) presidency, pledged to pay an extra 1 billion euros (about 1.2 billion US dollars) per year into the EU budget.
The overall size of the multi-years budget would also be reduced to 847 billion euros from the 871 billion euros proposed by the Luxembourg EU presidency earlier this year.
"This proposal amounts to a budget for a 'Mini Europe', not the strong Europe that we need," Barroso added.
The EU chief said that the ambition of the 25-nation bloc is an open, modern and enlarged Europe. "For this to happen, the Union must have the means to deliver on the policies," he said.
"I have been engaged in intensive talks with all the partners, and I will continue these talks over the next days," he added.
The EU member states have long been entering deadlock on the union's common budget for the next seven years, named financial perspective for 2007-2013.
The main stumbling blocks have been Britain's refusal to surrender its long-cherished rebate, and French resistance to calls for reform of generous farm subsidies.
The UK is keen to reach a deal on the budget at an EU summit on 15 and 16 December, two weeks before the end of its EU presidency.