European leaders are starting talks on the block’s budget for 2014-2020, but hopes on a deal remain remote as the nations are divided about spending cuts and how they should be implemented.

The draft budget–officially called the Multi-Annual Financial Framework – (MFF) was proposed by European Council President Herman Van Rompuy, who tailored the European Commission's original plan in order to find a compromise for both richer and poorer nations.

Eight of the so-called contributor nations including Austria, Britain, Denmark, France, Finland, Germany, Netherlands and Sweden are calling for further spending cuts, though they have different views on what should be cut or by how much. Sweden and the Netherlands backed freezing of the budget, while the UK took the toughest stance as the Prime Minister David Cameron had insisted he will veto any increase in the EU budget. 

“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, and to keep the British rebate,” Cameron said on Thursday as he arrived for a preliminary meeting with Herman Van Rompuy. .

But Britain welcomed a proposal made last week by Van Rompuy for a 75-billion-euro decrease in the budget that would leave Britain's rebate intact.

Meanwhile net recipient countries, including Poland, Portugal, Bulgaria, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Romania, Slovakia, Slovenia and most recently Spain want spending maintained at the current level or even raised. These countries oppose cuts of the so-called EU cohesion spending aimed at improving infrastructure in the poorer regions. The cohesion payments are the second major item of the 1trn budget, totaling 309.5bn euro or about 32% of the budget.

Agriculture subsidies are another bone of contention as it is the biggest item in the EU budget, accounting for 364.5bn euros or 37.5%. France opposes any cuts in agriculture subsidies with President Francois Hollande vowed "to fight" to keep the subsidies at the current level.

Even the EU Commission President, Jose Manuel Barroso, complained about the pressure for cuts, "No one is discussing the quality of investments, it's all cut, cut, cut."

European leaders will wrangle about the budget through Friday or even longer, as many of them doubt that differences can be bridged. German Chancellor Angela Merkel said another summit may be necessary early next year should the bloc's leaders fail to agree on a 2014-2020 spending plan by the weekend. 

“I don't know if we will have a definitive deal tomorrow or the next day. We want that," Mrs Merkel told lawmakers during a debate on Germany's own budget. "If necessary, we will have to meet again at the beginning of next year."

Meanwhile, Van Rompey pledged to propose "a revised version" of the budget plan when leaders begin the two-day talks in an attempt to find a compromise for all countries. "Let there be no mistake: the absence of an agreement would be harmful for all of us," he said in a summit invitation letter to the EU's 27 leaders.

Any of the 27 countries can veto the budget, and the European Parliament will also have to vote on the union’s spending plan even if a deal is reached.

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