Tensions high as EU's 27 leaders meet in Brussels to thrash out how much to spend in budget

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BRUSSELS - British Prime Minister David Cameron set the tone Thursday for what is expected to be a bitter fight over the European Union's budget, warning that the latest proposal for a spending ceiling does not go far enough.

Arriving at a summit of the 27 EU leaders, Cameron voiced the concerns of several countries that do not want to see an increase in the bloc's seven-year spending plan at a time when tough spending cuts are being imposed back home.

"No, I'm not happy at all," Cameron said about the latest offer for the 2014-2020 €1 trillion ($1.28 trillion) spending ceiling, as he headed into a meeting with the author of the proposals, EU President Herman Van Rompuy.

"Clearly, at a time when we're making difficult decisions at home over public spending, it would be quite wrong — it is quite wrong — for there to be proposals for this increased extra spending in the EU."

"So we're going to be negotiating very hard for a good deal for Britain's taxpayers and for Europe's taxpayers," he told reporters.

The EU budget primarily funds programs to spur growth in the bloc's less developed regions and farming and amounts to about 1 per cent of the EU's gross domestic product.

The European Commission, the EU's executive arm, backs more spending, arguing that cross-border initiatives will help to create the economic growth and jobs that the bloc of a half-billion people needs.

Facing an ever more vocal Euroskeptic electorate at home, Cameron is under huge pressure to veto any seven-year deal which would make the budget bigger. The U.K. and other countries that contribute more then they receive from the budget — such as the Netherlands, Sweden and, to a certain extent Germany — claim an austerity budget is the only justifiable outcome at a time when almost every member state has to cut its budget to lower debt.

Fifteen of the EU's most financially and economically vulnerable countries have joined forces to oppose any cuts to funds earmarked for economic growth and development. These countries include not only traditionally poorer member states, many in Eastern Europe, but also those hit hardest by the financial crisis, like Greece, Portugal and Spain.

They argue that they need sustained, even increased, help to close the wealth gap on the continent and that EU institutions need the means to implement their jobs and growth policies.

"Certain countries want to make drastic reductions in the budget. That's a big mistake," said Elio Di Rupo, Belgium's prime minister.

With every country having the power of veto, Dutch Prime Minister Mark Rutte fully realized what was coming.

"There will be quite a battle to come — the French, the British, southern Europe, eastern Europe, we all have our demands," Rutte said. "I don't know whether it will work out."

Going into the open-ended summit, which might well stretch into Saturday, Van Rompuy made a first compromise proposal that leaned toward Cameron's demands. It proposes a cut of between €3 billion ($4 billion) and €24 billion ($31 billion), depending on how the figures are read.

"With less money, we cannot do the same as before," Van Rompuy wrote in the invitation letter he sent to the 27 leaders.

If the summit fails to find a compromise, the issue could spill over into a new meeting next month, or into next year. There is no set deadline for a deal but the closer it gets to 2014, the tougher it will be for a smooth introduction of new programs.

"In talks with colleagues, I had one message. If this doesn't work out at once, let's be sure that the mood is not that dark that we have to spend months on patching up personal relationships," Rutte said.

If there is no deal up to 2014, there would be a rollover of the 2013 budget plus a 2 per cent increase accounting for inflation.

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Don Melvin and Carlo Piovano contributed to this story.