Foreign Secretary Jack Straw defended Britain's EU rebate Tuesday and dismissed as "unacceptable" a European Commission demand for a one-trillion-euro (1.3-trillion-dollar) annual budget.

Speaking in London, he said overspending by the European Union's executive branch -- and not Britain's controversial rebate -- should be the focus of ongoing negotiations over EU spending plans for the 2007-2013 period.

"The central question which the EU has to resolve is not the issue of our rebate. It is the level of overall spending by the EU," said Straw a day after EU ministerial talks in Brussels.

"The proposals of the European Commission, which sound in a modest range, to increase spending from 1.0 percent to 1.24 percent (of Europe's gross domestic product), actually amount to an increase of spending of over 200 billion euros, which is more than the total gross national income of Poland," he said.

"It is a 35-percent increase and it is unacceptable. We have got to focus on that, because if we get the spending down to acceptable levels, then the money any country has to pay will be less."

Britain was awarded its rebate in 1984 because of its disproportionately large net contribution to the EU budget, under fierce pressure from then-prime minister Margaret Thatcher.

Straw has warned that Britain is ready to go as far as using its power of veto on EU spending issues to keep the rebate, which is currently worth 3.2 billion pounds (4.65 billion euros, 5.87 billion dollars).

The European Commission, and smaller EU member states, argue that it is time for Britain -- now one of Europe's most prosperous nations -- to give up the rebate, especially in light of the bloc's enlargement into eastern Europe.

The commission is angling for a budget of one trillion euros, while the EU's six biggest contributor countries -- including Britain, France and Germany -- want a cap of 815 billion euros, or 1.0 percent of gross national income.

As a compromise, Luxembourg -- which currently holds the rotating EU presidency -- has proposed an overall budget ranging from 865 billion euros to 900 billion euros, representing the equivalent of 1.06 to 1.09 percent of GNI.

More high-level "conclave" talks on the EU budget are set for June 12, just days before a June 16-17 summit of EU leaders in Brussels and the July 1 start of Britain's six-month EU presidency.