EU budget summit: Cameron demands further cuts
British Prime Minister David Cameron says he will not accept an EU budget deal unless further cuts are made in negotiations in Brussels.
European Union leaders are holding a two-day summit to try to strike a seven-year spending deal, after a previous meeting in November failed.
But Mr Cameron said the figures being proposed "need to come down. And if they don't... there won't be a deal".
The European Commission head called for "a spirit of responsibility" in talks.
Jose Manuel Barroso said: "Further delays will send out a very negative message at this time of fragile economic recovery. The risk is that positions will harden and will be even more difficult to overcome."
The mood now remains cautiously optimistic but the Germans, who like to downplay expectations ahead of summits, are saying the talks will be 'difficult and divisive'”
The formal meeting has now begun, following a delay of several hours while leaders explored possible compromises in small groups.
Mr Cameron met his counterparts from Denmark, the Netherlands and Sweden - leaders who are potential allies in the tough negotiations.
Mr Cameron also had a separate meeting with German Chancellor Angela Merkel, Mr Barroso and the summit chairman, European Council President Herman Van Rompuy. France's President Francois Hollande failed to turn up because of "scheduling difficulties", UK officials said.
Above-inflation EU spending at a time of cuts in national budgets is the main issue dividing the 27 member states.
The Commission - the EU's executive body - had originally wanted a budget ceiling of 1.025tn euros (£885bn; $1.4tn) for 2014-2020, a 5% increase. In November that ceiling was trimmed back to 973bn euros, equivalent to 943bn euros in actual payments.
But with other EU spending commitments included, that would still give an overall budget of 1.011tn euros.
The UK, Germany and other northern European nations want to lower EU spending to mirror the cuts being made by national governments across the Continent.
An EU source told BBC News any extra cut would probably be made to growth-related spending in areas such as energy, transport, the digital economy and research.
How does the EU spend its money?
The biggest spending areas - agriculture and regional development - are largely ring-fenced because of strong national interests, the source said, speaking on condition of anonymity.
The BBC's Europe editor Gavin Hewitt notes that whatever is agreed has still to go to the European Parliament, and MEPs are big backers of EU spending.Compromises
The summit was to have begun at 14:00 GMT on Thursday, but the formal session did not get under way until 19:45. "We needed more time to work on the compromise proposal," an unnamed EU official told AFP news agency.
A grouping led by France and Italy wants to maintain spending but target it more at investment likely to create jobs.
President Hollande told reporters on Sunday that conditions were "not yet in place" for a deal but also signalled that Paris was prepared to make compromises.
How far they can go
- The European Commission's original proposal for a budget ceiling of 1.025tn euros was whittled down to 973bn at the November summit
- An EU source has told BBC News that a further cut is now likely, which could bring the budget down to about 920bn in actual payments
- The UK has argued for a figure as low as 886bn and its calls for restraint are echoed by Germany, the Netherlands and Sweden
- France and Italy favour the November figure but want spending refocused on investment for growth
- Poland, the biggest of the new member-states which benefit significantly from EU subsidies, has said further deep cuts to the budget are "inconceivable"
- The European Parliament, which can vote down the budget, is likely to oppose any deep cuts
- If the new seven-year budget is blocked, the 2013 budget will be rolled over into 2014, creating uncertainty over future EU spending
Mrs Merkel - seen as the main powerbroker in the summit - has already acknowledged that the talks will be "very difficult".
A European Commission spokesman warned that more severe cuts would leave the Commission unable to do its job as the EU integrated more deeply in response to the financial crisis.
"How can we imagine that an EU institution can ensure a proper banking union with a budget that is cut by whatever billions in figures we hear, here and there?" said spokesman Olivier Bailly.
"At the moment, there is a need for a reality check between the requests that are sent to the Commission, the Council, the Parliament, or the European Central Bank, and the budget - the means - that are given to these institutions to fulfil their commitments."
The split in the EU reflects the gap between richer European countries and those that rely most on EU funding.
The argument for higher spending is supported by many countries that are net beneficiaries, including Poland, Hungary and Spain.
Others, mostly the big net contributors, argue it is unacceptable at a time of austerity.
Germany, the UK, France and Italy are the biggest net contributors to the budget, which amounts to about 1% of the EU's overall GDP.
Analysts say failure to reach an agreement on its seven-year budget would mean the EU falling back on more expensive annual budgets.9