EU budget talks inconclusive

The European Council president said talks since Thursday had shown "a sufficient degree of potential convergence" and he still expected to eventually broker a deal.

"We will need some more time to finalize a solution," Van Rompuy said on Friday evening when announcing the summit's failure to reach agreement.

The European Commission had initially proposed spending for the seven-year period of 2014 thru 2020 of 1.09 trillion euros ($1.4 trillion).

Van Rompuy had subsequently said this should be trimmed by 80 billion euros through budgetary readjustment with less emphasis on research, transport and foreign policy and more benefits for the EU's poorer eastern and southern regions and for agriculture in line with demands from France.

Friday's summit closure without agreement means that the EU's existing budgetary outlay will be rolled forward by one year into 2013 but adjusted for inflation.

Belgium criticizes Britain

Prime Minister Elio Di Rupo of Belgium, which was among a group of nations that had sought more funds for poorer regions, accused Britain of lacking "financial ambition."

British Prime Minister David Cameron had wanted EU spending frozen lower at 2011 levels, which diplomats said amounted to a cut of about 200 billion euros.

"We need an affordable spending cut. That is what is happening at home and that's what needs to happen here," Cameron said shortly before the talks were called off.

Chancellor Angela Merkel of Germany, which had also been pushing for budget restraint but less than Britain, had already predicted a new round of talks.

"I have always said that it is not dramatic if today is only the first stage," Merkel said. "If we need a second stage, then we will make time for that."

Polish Prime Minister Donald Tusk, whose country is the biggest net recipient of EU funds, including assistance for its agricultural sector, said talk of cutting EU administrative costs was a mistake.

"We shouldn't fall into a trap such as when someone says '100 billion or 10 billion of cuts', and pretends it's about administration. This is an effort to block the compromise more than anything else," Tusk said.

Britain's Cameron wanted wage cuts

Cameron had been pushing for the EU to cut its wage bill by 10 percent and to extend the retirement age of EU officials from 63 up to 68 coupled with reductions in generous pensions

In reply, the European Commission said the salaries of British civil servants were set to rise by around 1 percent.

In another line of confrontation, Italy had challenged a rebate system that reduces the EU budget contributions by Britain and other net payers such as Germany and Sweden.

"Italy until now has been disproportionally penalized," said Prime Minister Mario Monti, who had threatened to walk out unless Italy secured more funding.

ipj/dr (Reuters, dpa, AP)