The UK government last night rejected a compromise offer made by Dominique Strauss-Kahn, the French finance minister, over the creation of a "euro club" of economic and monetary union members. After 48 hours of intensive diplomacy by the British prime minister Mr Blair and chancellor Mr Brown this weekend's European Union summit in Luxembourg looks set to be dominated by attempts to bridge the Anglo-French gap.

The main stumbling block remains the UK's demand that it and other countries outside the new currency after introduction in 1999 should be members of the euro club.

The French government has consistently said only those countries participating in EMU should belong to the club. But yesterday Mr Strauss-Kahn presented what he hoped was a gap-bridging compromise. He suggested the club could make information available to those not participating in EMU and that they could be "invited" to take part in its meetings "for specific topics".

However, Mr Brown is insistent that the UK and others outside EMU should "as a matter of course" participate in club meetings.

Under the UK proposal, the "outs" would withdraw from the club for discussions covering specified EMU issues, such as the new European central bank's interest rate policies and the possible exchange rate at which an "out" might join EMU.

Another issue that could be reserved for those signed up to the euro might be exchange rate policy for the new currency, although Mr Brown has not decided whether he is prepared to be excluded from discussions on this since it would have implications for sterling.

However, his economic adviser refused to rule out accepting another compromise mooted by the French that would allow the club to differentiate between non-participants in EMU depending on their commitment to sign up eventually for the euro.

One non-negotiable UK demand is that Ecofin, the EU's council of finance ministers, should remain the sole important decision-making body for European economic issues.