EU leaders warn budget deal far off - Telegraph.co.uk

"It's what everyone has in mind," Hollande said as he left for the night, due back hours later to try to breach the divisions.

But giving "time to time to reach a deal" will "most likely be the wise choice," he said.

The first round of talks followed a tough day of face-to-face meetings between Van Rompuy and each of the bloc's leaders, followed by a flurry of backroom bilaterals.

"Maybe this meeting will be long and complicated," Van Rompuy said as the two-day talks opened. "Fortunately this issue only comes up every seven years," he added.

Ahead of the summit France and Germany, whose cooperation is often the much-needed driving force for a breakthrough in tough EU negotiations, called for efforts to find common ground.

"I have come to seek a compromise, not to set an ultimatum," said Hollande.

But the threat by prime minister David Cameron to wield his veto unless the EU meets his demands for substantial cuts in the proposed budget, weighed heavily on the proceedings, with the bloc's poorer nations ready to battle for funds many richer nations want slashed.

"The room for manoeuvre for Mr Cameron is so small that it is likely he will not agree, that's my impression," European Parliament President Martin Schulz said.

A new draft proposal from Van Rompuy, aiming to accommodate 27 different points of view, was circulated to heads of state and government for discussion at the start of talks.

Cameron, who is under constant pressure from eurosceptics in his Tory party to battle European demands on the British tax payer, had vowed to bring down the budget from a proposed €1.047 trillion to €886bn.

Rompuy's new proposal reintroduces his own earlier figure of €972bn in spending, which comes to just over one percent of the EU's total economic output, the usual benchmark used in Brussels budget talks.

A British diplomat warned "there is still a long way to go" with figures "pretty similar to what we had this morning" before the bilaterals took place.

The latest blueprint which negotiators will work from Friday spreads the funds more generously to sensitive envelopes like the cohesion funds for regional development, and the Common Agricultural Policy, the farm subsidy programme cherished by France that are the budget's biggest single item.

Amid the gloom, Austria's Chancellor Werner Faymann raised the idea of a fresh summit in January and February, as did the premiers of Italy and Spain, Mario Monti and Mariano Rajoy.

"We will not accept the unacceptable," warned Monti who like France defends farm subsidies, but also backs cohesion funds which have vastly aided Italy's less developed south.

Italy is among the countries that contribute more to the EU budget than they get back, known as the "net contributors", while once mighty Spain, rocked by the eurozone debt crisis, rejoined the camp of those who get more cash than they put in.

Britain is the most vocal of the group of austerity-driven contributor nations seeking EU budget cuts to match belt-tightening programmes at home.

"No, I'm not happy at all," Cameron said on arrival.

Cameron on Friday will defend rebates, another hot-button issue that could delay a budget resolution until next year.

Britain in particular cherishes the budget rebate obtained by then prime minister Margaret Thatcher in 1984 on the grounds that London was paying too much into the bloc's coffers.

Source: AFP