After the usual midnight haggling, EU leaders agreed the next seven-year EU budget in the early hours of December 17, with both the UK and Germany giving up money which will go towards development support in the 10 new member states, including Cyprus and Malta.

One of the major stumbling blocks was the UK's reluctance to concede its budget rebate, and France's reticence to give up farm subsidies under the Common Agricultural Policy.

The UK eventually agreed to give up EUR10.5bn of its budget rebate over the seven years, while the French agreed to a review of the CAP in 2008/9.

However, in an interview with the Financial Times, Mr Schussel said that the summit which led to the budget agreement has resulted in unity within the EU being seriously damaged.

Schussel stated in reference to negative comments in the British press regarding Tony Blair's decision to give up some of the sacred budget rebate that: "You read that £2 billion is being given to those insane people in Brussels and that is £2 billion less for British schools and hospitals."

"Europe will kill itself if it continues like that," he warned.

At present, the EU budget is funded through a combination of import duties, value added tax revenues and direct contributions from member states, and Mr Schussel along with fellow centre-right including German Chancellor Angela Merkel and Nicolas Sarkozy, leader of France’s conservative UMP is open to the idea of a dedicated EU tax to fund the budget.

However, such a proposal is likely to be fiercely opposed by a number of member states, including the United Kingdom, Ireland the Czech Republic, Estonia and Slovakia, which would all have the power to veto the measure.

The Commission is set to review the European budget by 2008/9 and European Commission president Manual Barroso has indicated that no options will be left off the table in its attempt to streamline the process. “We are going to look at it without taboos,” he stated.