Britain's annual European Union rebate "is unacceptable", Spanish Finance Minister Pedro Solbes said Wednesday amid negotiations on an EU budget for 2007-2013 that could see generous cohesion funds for Spain scaled back.

Solbes said the Spanish government wanted to reach an agreement on the EU budget before the Luxembourg presidency expires at the end of next month, adding it would be "difficult" to envisage an accord once Britain takes over the rotating presidency on July 1.

Solbes added that Madrid judged insufficient a Luxembourg proposition to continue paying Spain a reduced slice of cohesion funds through to 2008.

Currently, Spain, the main beneficiary of such aid since its EU accession in 1986, receives around two billion euros (2.5 billion dollars) annually from the fund.

With a second proposal due later in the week, Solbes said he was not optimistic on reaching an accord.

Cohesion funds are being scaled back following the accession of 10 mainly eastern European states to the EU a year ago.

Spanish European Affairs Minister Alberto Navarro last month said Madrid would be pushing for the payouts to be maintained for three years and at a higher level.

The current Luxembourg proposal is for the Spaniards to receive not more than 3.5 billion euros over two years.

A British government spokesman insisted Monday that Britain's annual rebate of 4.32 billion euros remained "fully justified," 21 years after then-prime minister Margaret Thatcher hammered out the deal on the British EU budget contribution.