Marine Le Pen, the leader of France's far-right Front National, has refused a demand to repay nearly €300,000 (£258,000) of EU funds that a European parliament investigation alleged she misspent.
An investigation by a European parliament watchdog claimed that between 2011 and 2012 Le Pen had illicitly paid party staff for Front National work using money that should only be used for MEPs to pay assistants for legislative tasks.
Le Pen, who polls show could make it to the final round of the French presidential election in May, had a deadline of midnight on Tuesday to pay back the funds. She refused to pay and now faces her salary as an MEP being docked each month.
She denied the allegations of fraud and said she would not "submit to persecution" by repaying the money.
In a statement to Reuters news agency, Le Pen described the demand as "a unilateral decision taken by political opponents ... without proof and without waiting for a judgment from the court action I have started".
An EU official said failure to pay could lead to her monthly EU parliamentary salary being halved to about €3,000 euros from February, and she could also lose other allowances. In total, about €7,000 could be taken from her EU payslip every month.
Five other Front National members of the European parliament including Le Pen's father, Jean-Marie Le Pen, had previously had their EU payments cut because of misused money that was not reimbursed, an EU official told Reuters.
Several EU lawmakers from other political groupings have also been investigated for expenses that were not in line with EU rules. Most have agreed to reimburse misspent money.
The investigation into misuse of funds was led by the watchdog on fraud against the EU budget. That agency has also taken the case against Le Pen to French courts, which will decide whether other sanctions are warranted.