EU budget summit ends without deal; UK, Germany seek deeper cuts

European Union leaders failed to reach agreement on Friday on a new seven-year budget for their troubled bloc, calling off talks in less than two days after most countries balked at far deeper spending cuts demanded by Britain and its allies.

European Council President Herman Van Rompuy said they decided to end a special summit on the 2014-2020 EU budget, worth about 1 trillion euros, and would try again early next year rather than continue negotiating into the weekend.

"The bilateral talks yesterday and the constructive discussion within the European Council show a sufficient degree of potential convergence to make an agreement possible in the beginning of next year. We should be able to bridge existing divergences," Van Rompuy said.

"My feeling is that we can go further (in cuts) but it has to be balanced and well prepared," he said. Chancellor Angela Merkel of Germany, the biggest contributor to EU coffers, said she had not expected a deal at the first attempt.

British Prime Minister David Cameron said a compromise plan tabled by Van Rompuy that scaled back cuts in farm subsidies and regional aid to placate France and Poland was "just not good enough", given the austerity that governments were implementing at home. He said other northern EU countries that contribute more to the budget than they get back felt the same way.

Cameron said a deal was still possible on the EU budget but the European institutions were "living in a parallel universe" and must adjust to the real world of budget cuts. Lithuanian President Dalia Grybauskaite said Germany, Britain, Sweden and the Netherlands, all net contributors, demanded further cuts of at least 30 billion euros on top of the 80 billion already trimmed from the European Commission's original blueprint.

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