Britain faces renewed criticism over handling of EU presidency

Almost halfway through the six-month term, the former French president, Valéry Giscard d'Estaing, has said the British presidency was achieving "very little".

However M. Giscard conceded on BBC Radio that the lack of achievement was "not due to the British Government" but to "the system", and most diplomats said it was premature to judge a presidency which has had little time to work due to the summer break.

British officials in Brussels rejected the charge of inactivity, pointing to the complex negotiations under way to try to secure the start of EU membership talks with Turkey on 3 October.

Nevertheless, interventions yesterday underlined concern about the deadlock over the EU's future financing package which was blocked in June. The European Commission backed calls from the new ex-Communist states for the EU's budget to be discussed at a meeting of heads of government at Hampton Court on 27 October.

The EU Budget Commissioner Dalia Grybauskaite highlighted the size of the British budget rebate - due to rise to €5.7bn (£3.8bn) this year from €5.3bn - and, when asked if it was unfair, saidshe would "not argue" with such an interpretation.

She added: "How can you talk about the future of Europe without the future of finances for Europe?" Asked whether the issue should be debated at Hampton Court, she replied: "I have no idea how it is possible to avoid it in any discussion on the future of Europe."

Mr Blair has tried to keep the meeting free for discussion of economic and social regeneration, Europe's global role and internal security issues, but expectations are being lowered. He had hoped to relaunch reform of the European economy by striking a partnership with a new German Chancellor. But Angela Merkel's failure to win a convincing election victory has dealt a heavy blow to those prospects.

Behind the scenes the UK has been holding bilateral talks with other governments on the EU financing deal for 2007-13 and the British plan is to come up with a proposal in November, concentrating negotiations into the final weeks of the presidency culminating in a December summit.

But several ex-Communist countries have made it clear they will raise the issue at Hampton Court unless they are satisfied it is being given urgent attention. The new member states stand to gain most from the EU budget and will lose most if there is no deal on funding.

One EU official argued yesterday: "The real question is whether the British presidency is working towards a deal. You cannot cut a deal if the presidency is not working for one."

A British official said the UK is "committed to making its best possible effort to get a deal".

Mr Blair helped block a deal on the budget at a summit in June, and is only likely to achieve one by compromising over the UK rebate from the EU.

In June, the Prime Minister issued a "wake up call" to his fellow European leaders demanding a wholesale change in the way the EU budget is structured. He said the British budget rebate could be negotiated but only if he wins a commitment to "at least set out a process that leads to a more rational budget; and that this must allow such a budget to shape the second half of that [financial] perspective up to 2013."

One possibility is to secure a deal capping the rebate at a figure above its current value, while agreeing to review EU expenditure including farm subsidies. But France, the main beneficiary of the Common Agricultural Policy, is unlikely to give Mr Blair any tangible commitment to reduce spending before 2013.