A Jewish film-maker has handed back a prestigious award from the Edinburgh International Film Festival in an ugly spat with the British director Ken Loach.

Gary Sinyor, who won a Charles Chaplin Award at the EIFF for his Jewish comedy Leon the Pig Farmer, said he wanted nothing more to do with the festival after accusing it of caving in to Mr Loach's anti-Israeli views.

The row began after the festival accepted a £300 donation from the Israeli embassy to pay for a film studies graduate of Tel Aviv University to attend the premiere of her short movie Surrogate at the festival in Scotland next month. But the sponsorship raised the hackles of Loach, who backed a boycott unless the money was returned forcing the EIFF to find alternative ways to fund Tali Shalom-Ezer's trip.

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Now the row has flared up again. In an article for The Independent, Sinyor brands Loach "an extremist", a "blackmailer" and a "hypocrite" for raising objections over the source of funding.

He also accuses film festival organisers of "rolling over", saying: "Why on earth did the EIFF take his (Loach's) views into account?"

He said: "Today I am writing to the Edinburgh Film Festival and asking for my name to be taken off their records. I am removing Winner, Best British Film, Edinburgh 1992, from my CV. If I could cut the award in half and send it back, I would."

Sinyor saved his most damning indictment for Loach. "Ken Loach took it upon himself publicly to endorse the boycott of the entire Edinburgh Film Festival to make his views doubly clear... It's a shame that Ken feels particularly strong about not having anything to do with Israel or Israeli money. It's a shame because clearly some Israelis obviously like Ken."

Yesterday, Loach remained intransigent, saying: "I don't respond to personal attacks. I would urge Gary Sinyor and others to look at the facts of the boycott."

He also sent The Independent a copy of his open letter, written to Ms Shalom-Ezer, explaining why he objected to her source of funding, which said: "To be crystal clear, as a film-maker, you will receive a warm welcome in Edinburgh. You are not censored or rejected. The opposition was to the festival's taking money from the Israeli state."

In a blog, Tali Shalom-Ezer, aged 31, was quoted as saying: "Generalising all citizens of Israel as warmongers and racists is racism and outrageous, and as members of the peace camp we are personally hurt by it."

Iain Smith, chair of EIFF, said he had launched a review. "I apologise sincerely for the distress. Clearly we didn't appreciate enough that our festival cannot keep itself entirely detached from serious geopolitical issues," he said.