Belarussian president Alexander Lukashenko has retaliated against critics who branded him a dictator by saying: "Better to be a dictator than gay."

Lukashenko's playground comments were in response to German foreign minister Guido Westerwelle, the country's first openly gay minister, who had said the Belarus leader was "Europe's last dictator".

EU leaders have set fresh measures to put pressure on the Belarus government over allegations of human rights violations.

Lukashenko, who has held power since 1994, said Belarus rejected the EU warning.

"This is absolute hysteria," local news agency Belta reported him as saying. "And as you can see, at the forefront there are two types of politicians: one lives in Warsaw, another in Berlin.

"Whoever was shouting about dictatorship there, when I heard that I thought: it's better to be a dictator than gay."

EU leaders said sanctions would target those responsible for human rights abuses and people who support or directly benefit from Lukashenko's government.