Brussels - EU leaders looked set to throw in the towel Friday as talks on a trillion euro budget for the 27-member bloc faltered over tensions between rich and poor states and Britain's "virulent" demands for austerity.
British Prime Minister David Cameron kept up his defiant stance as he arrived for a second day of bitter negotiations on the European Union budget for the seven years from 2014-2020.
"There really is a problem that there hasn't been the progress in cutting back proposals for additional spending," Cameron, who back home has to pander to the powerful eurosceptic wing of his Conservative party, told reporters.
Britain, like many countries across Europe, is responding to economic crisis with major public spending cuts and Cameron argues that at a time of austerity at home the EU must also make deep cuts.
His bleak assessment of the state of the budget talks was shared by other EU leaders, who arrived one by one at European Council building in Brussels for bilateral meetings before the summit proper resumed at midday.
"I believe that also in this round, we won't be where have to get to, which is a unanimous decision," said German Chancellor Angela Merkel, repeating a line she had taken even before arriving in the Belgian capital.
"If we need a second round, then we will take the time necessary for it," se added, referring to the prospect of a second summit in the coming months to nail down a deal.
Nearly a year after he angered his European counterparts by vetoing a pact to resolve the eurozone crisis, Cameron was again at odds with them by demanding cuts to the perks enjoyed by so-called "eurocrats" -- the well-paid EU civil servants who are frequently targeted by the British press.
British officials insisted that other countries including Sweden, the Netherlands and Germany largely backed Cameron's position for a reduction in the planned trillion-dollar budget for the seven years from 2014-2020.
But an EU diplomat said the main obstacle was Cameron's demand for cuts, adding: "The most virulent were the British, the Swedish and the Dutch."
Cameron had vowed to bring down the budget from a proposed €1.047 trillion to €886bn.
The summit was scheduled to resume at 11:00 on Friday once delegates from the 27 member nations have had time to examine new proposals on the budget submitted by EU President Herman Van Rompuy.
The proposals reintroduce 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.
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 is the budget's biggest single item.
"We will not accept the unacceptable," warned Prime Minister Mario of Italy, which 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.
Cohesion funds -- billions of euros outlayed each year to the EU's poorer members so they can catch up with richer neighbours -- are being defended tooth and nail by the 15 "Friends of Cohesion" nations, led by Poland and Portugal.
"Cohesion is an issue of competitiveness and growth for the whole European Union, not just for the countries with the greatest needs," argued Prime Minister Antonis Samaras of debt-stricken Greece.