By Alix Kroeger BBC European Union reporter

The parliament has decided to stop paying rent to Strasbourg

The President of the Parliament, Josep Borrell, has also written to French Prime Minister Dominique de Villepin, asking him to intervene.

Earlier this week, MEPs cancelled a deal to buy the buildings. They have also suspended payment of the rent, the next instalment of which is due in July.

The Mayor of Strasbourg, Fabienne Keller, has said there was no wrongdoing, and has threatened to sue those who have made accusations of corruption.

The European Parliament has been paying rent to Strasbourg since 1979, but only now have the allegations come to light.

Mark-up?

UK Conservative MEP Edward McMillan-Scott, one of the parliament's vice-presidents, has accused Strasbourg of acting "in bad faith over more than a generation."

If this affair helps put an end to the nonsense of the parliament meeting, at great expense, in two different countries, then so much the better Chris Davies MEP

Two of the Parliament's buildings in Strasbourg are owned by a Dutch pensions company, SCI Erasme. It leases the buildings to the city of Strasbourg, which in turn sub-lets them to the European Parliament for 10.5 million euros (£7m) per year.

MEPs now believe Strasbourg has been marking up the price by 15 to 25%.

Last year, the parliament opened negotiations to buy the buildings from SCI Erasme. It reached an agreed price of 136m euros (£90m).

However, it then emerged that SCI-Erasme agreed to pay compensation to Strasbourg of 29m euros (£20m).

The question MEPs are asking is: compensation for what? They believe it is to make up for the percentage Strasbourg was taking as profit on the rent.

'Insurance'

The mayor of Strasbourg has said the extra payment is a form of insurance, in case the European Parliament should ever move away from the city. She has denied any wrongdoing.

This could potentially be one of the worst examples of Euro corruption yet seen Jeffrey Titford MEP

Under the European treaty signed in Edinburgh in 1992 and confirmed in Amsterdam in 1997, the European Parliament is required to meet in Strasbourg 12 times a year.

But it is an obligation many MEPs resent. At the last plenary session, more than 150 of them backed a procedural move which would have reopened the question of whether to continue with the Strasbourg sessions - but the motion was defeated.

"If this affair helps put an end to the nonsense of the parliament meeting, at great expense, in two different countries, then so much the better," said Chris Davies, leader of the UK Liberal Democrats in the parliament.

Compensation

MEP Jeffrey Titford (UK Independence Party) said parliament should ask for compensation from the City of Strasbourg. But he also criticised the parliament for not picking up on the matter sooner.

"Why didn't the parliament's own internal procedures expose the appalling manner in which the tenancy agreements had been handled?" he asked. "This could potentially be one of the worst examples of euro corruption yet seen."

But French Green MEP Gerald Onesta, who sits on the Budget Committee, defended the parliament.

"No one would have dreamed of a situation like this," he said. "We acted in good faith. We had no inkling that we could be overcharged."

"We had no reason to suspect the price we were paying to Strasbourg was different to the amount SCI Erasme received," he explained.

Investigation

Other MEPs have called for the European anti-fraud agency Olaf and the European Court of Auditors to investigate.

The actual sums involved are difficult to establish, but Latvian centre-right MEP Valdis Dombrovskis estimated the Parliament could have been overcharged by 27m euros (£18m) since 1979.

"The allegations are reinforced by the fact that the City Council of Strasbourg refuses to submit to the European Parliament the documentation on its operations with SCI Erasme," he said.