A meeting of EU leaders expected to welcome a deal on the seven-year EU budget and to focus on youth unemployment was held up on Thursday (27 June) by Britain's concerns over its rebate.

"It's absolutely essential that we stick to the deal that we reached in February and that we protect the UK rebate," British Prime Minister David Cameron said on his way into the summit in Brussels.

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At stake is about €200 million out of the overall €3.6 billion which the UK gets back each year from the EU budget.

The mechanism was created in the 1980s by then British leader Margaret Thatcher.

It came about because most of EU funds were going to farm subsidies in France and Italy.

EU leaders agreed on the 2014-2020 budget in February.

But in the meantime, EU countries have also agreed reforms to the Common Agricultural Policy and the European Parliament has won extra flexibility on how to use the money.

According to a German source, the new developments saw Italy and France try to claw back most of the €200 million.

The contact said Paris and Rome refused to back down in talks with Cameron.

The source added that, from Germany's perspective, "a compromise needs to be found."

Speaking at a press conference after meeting the leaders, EU parliament chief Martin Schulz said that he is not surprised Cameron made a big fuss about the rebate.

"I think Prime Minister Cameron is never happy when we discuss the European budget," he said.

Later on, an EU official described the debacle as a "complete red herring," noting that a technical solution was found close to midnight.