Asked if there could be a deal without a UK concession, Gerhard Schroeder said: "That will not be possible".

French president Jacques Chirac has also urged Britain to make a "gesture" on the £3bn ($5bn; 4.5bn euros) it gets back from the EU budget each year.

The UK says it will not renegotiate without a major review of EU spending.

Schroeder was speaking after talks with his Luxembourg counterpart, Jean-Claude Juncker, who currently holds the EU presidency.

He said he was not without hope that a compromise deal could be reached.

"What is important is that all countries show responsibility for this whole Europe and make a serious attempt to secure the financing," he said.

The chancellor met earlier in Paris with Mr Chirac, who called on Britain to "make an effort", saying there needed to be "greater fairness" in EU contributions.

UK Prime Minister Tony Blair argues that even with the rebate, Britain's net contribution to the EU is much greater than that of France - whose farmers receive generous subsidies from the EU's Common Agricultural Policy.

The BBC's Caroline Wyatt in Paris says the war of words has set the scene for a deeply uncomfortable EU summit in Brussels next week.

The UK will be isolated on the rebate, with the 24 other member states arguing that it should be scrapped.

The row erupted on Thursday, when the French president urged Britain to make a "gesture of solidarity" on the rebate, which the UK won in 1984 after tough negotiations by then-Prime Minister Margaret Thatcher.

Quickly responding, Blair said London would not give it up. On Friday, he added that the topic could only be discussed as part of a general review of the EU budget.

But during his news conference with Schroeder, Chirac made clear that a 2002 agreement that preserves farming subsidies should be implemented.

"I am not willing to compromise" on this issue, he said.

Next week's EU summit is also overshadowed by the rejection of the European constitution by French and Dutch voters in recent referendums.

In Paris, both Schroeder and Chirac reiterated calls for other members states to go ahead with their own ratification procedures.

The UK, however, has suspended its own plans for a referendum.

Ten member states have already ratified the document. It cannot come into force until all 25 EU countries have approved it.