Reports said the two leaders had agreed to hold the meeting from 10 -11 April at Mr Blair's official country residence of Chequers.

The two men met in Bonn on the eve of Friday's European Union summit which is aimed at seeking agreements on how to remodel the EU's $65 billion common budget.

But Mr Blair and Mr Aznar failed to make any progress on the latest row over Gibraltar sparked by a fishing dispute.

Madrid is angry about a local agreement struck between the UK Overseas Territory and Spanish fishermen.

The crisis has led to lengthy border checks by Spanish authorities, disrupting Gibraltarians' lives.

On Sunday UK Foreign Secretary Robin Cook warned his opposite number, Abel Matutes, that Gibraltar could not be put under siege by a neighbouring country.

Embarrassing row

BBC Correspondent David Eades says the row over Gibraltar is embarrassing for two prime ministers who profess to share much common ground.

Spain has contested the status of the British colony for almost 300 years. But Mr Blair made clear that its status would only alter with the consent of Gibraltar's people.

However, the two leaders emphasised there were no hard feelings, and Mr Blair wished Mr Aznar a happy 46th birthday, offering him a 1953 bottle of red wine.

Money laundering

Meanwhile, Mr Matutes has revealed Spain is preparing a "grand dossier" on criminal activity in and around Gibraltar, according to the Spanish news agency Efe.

The Spanish foreign minister said the report would show criminality around Gibraltar "exceeds the limits of tolerance".