Tony Blair says he cannot see how he can bridge his disagreement with French President Jacques Chirac over the controversial British EU rebate.
The prime minister and Mr Chirac have clashed over UK rebate
The UK premier said his talks with Mr Chirac were "immensely amicable" but there was "sharp disagreement".
Mr Blair earlier flatly rejected a formal plan put forward by Luxembourg to freeze Britain's £3bn rebate.
A No 10 spokesman said the plan to freeze the rebate for 2007-13 would have cost the UK £16-20bn.
The spokesman said: "This was not acceptable to us". The issue of a wider review was now on the agenda, he said.
Farm subsidy row
Mr Blair's talks with President Chirac in Paris ended a diplomatic tour which took in Russia and meeting Germany's Chancellor Gerhard Schroeder in Berlin.
It was during a stop off in Luxembourg that the country's Prime Minister, Jean-Claude Juncker, holder of the current presidency of the EU, proposed a freezing of the UK rebate.
Mr Blair does not want the £3bn (4.4bn euros) annual refund discussed unless farming subsidies are also debated - something Mr Chirac will not accept.
The UK won its rebate in 1984 after tough negotiations by then-Prime Minister Margaret Thatcher.
The rebate's actual value varies from year to year - it returns to Britain two thirds of the difference between UK payments to Brussels and the money it receives back in EU spending.
In Paris, Mr Chirac did not hold the traditional post-talks news conference with Mr Blair.
But the UK prime minister conceded that controversy over Britain's rebate was a stumbling block in negotiations over the EU budget from 2007-2013.
"It is very difficult," he said. "The meeting I have just had with President Chirac was immensely amicable, but obviously there was a sharp disagreement.
"I think it is difficult to see these differences being bridged, but of course we continue to talk to people including the presidency about it."
It was Mr Blair's first face-to-face talks with Mr Chirac since the French and Dutch "No" votes on their referendum on the European constitution.
He said he believed the EU should "have some pause for reflection" for months over the recent "no" votes in France and the Netherlands.
There had been "some convergence" between his views, and that of the French president, on such a pause.
Mr Blair said this time should see a debate in which the leaders made clear their priorities were the same as Europe's people.
This meant concentrating on science, trade, training, tackling organised crime and people smuggling rather than spending 40% of its budget on agriculture, which employed 2% of people, he said.
On a more positive note he said he had received backing for his plans to make Africa and climate change the two priorities of next month's G8 summit in Gleneagles, Scotland.
France says the UK is undermining European solidarity by refusing to give ground on its annual refund.
UK Conservative leader Michael Howard says the focus on the rebate is a victory for Mr Chirac and a diversion from the constitution crisis.
The Liberal Democrats say the rebate is justified because of inequalities created by the farms subsidies.