LONDON, Dec. 10 (Xinhuanet) -- British Prime Minister Tony Blair said on Friday that there would be "very tough negotiations ahead"on the European budget.

    "I think that the overall mood is one of the people wanting to reach agreement but I have to say that there are still some very tough negotiations ahead because the room for maneuver is very limited," Blair told reporters after talks with EU leaders ahead of next week's summit to discuss the 2007-13 budget.

    Failure to come up with a new Budget deal next week would "cast a shadow" over the EU and agreement was needed for enlargement of the Union to become a reality, he warned.

    He said if there was no agreement on the EU budget at the summit next week, it would be "highly unlikely" that a deal could be reached under next year's Austrian and Finnish presidencies.

    Blair said he could not sign up to a deal on the new European budget unless there is a full review of EU farm subsidies in 2008.

    "People must leave open the possibility of change," he said, adding that the Britain's rebate could also be reviewed.

    Britain has already offered to give up some of its rebate so it pays what Blair called its "fair share" towards EU enlargement, but several EU countries said the offer has not gone far enough.

    Blair, who holds the rotating presidency of the EU, denied he had given up the prospect of reform of the Common Agricultural Policy (CAP) before 2014 - the end of the next budget period.

    He said he had never thought there would be a deal on changing farm subsidies this month because France and other EU members would resist it.

    But he insisted there would be a European Commission review of the CAP and the rebate in 2008 so that the second half of the budget could be renegotiated.

    "My insistence is that we must at least have the prospect of being able to make a change if we wish to do so," he said.

    "I cannot force such a change now, but I can insist that we leave open the possibility of such a change for the second half of the financial perspective (the budget)," he said.

    The review would be able to take account of a new world trade deal and the rebate would be a "very significant lever" for reform, he added.

    Blair was speaking after two days of talks with European leaders in Downing Street aimed at finding common ground on the details of the 2007-2013 Budget. The Prime Ministers of Greece and Spain were at Number 10 on Friday, along with Irish Taoiseach Bertie Ahern and Jose Manuel Barroso, President of European Commission. Blair also held telephone conferences with the premiers of Luxembourg, Belgium and Austria.

    Britain aimed at reaching a deal before the end of its six-month presidency of the EU but several EU member countries were calling for bigger cuts to its annual rebate.

    After talks on Friday in Downing Street, Barroso said he was now more positive because he knew there would be further proposals.

    "It is clear those (earlier) proposals weren't acceptable now there will be some new proposals and I hope those proposals will be in the right direction," he said.

    On Monday, British Foreign Secretary Jack Straw unveiled British proposal to cut its European Union (EU) budget rebate in the future by nearly 800 million pounds (1400 million US dollars) a year.

    Straw said Britain was ready to pay an extra 1 billion Euros (about 1.18 billion US dollars) per year into the EU budget, which is part of a package aimed at ending deadlock over the 2007-2013 EU budget before Britain ends its EU presidency.

    Straw said Britain wanted to pay its fair share of the costs of enlargement, adding that the European Commission's original proposal was "far too high".

    But Britain's proposal was rejected on Wednesday with many EU countries calling for bigger cuts to the UK's annual rebate. Enditem