EU leaders set to cut budget for first time ever

European Union leaders appeared poised Friday to cut the bloc's budget for the first time in its six-decade history. An agreement to cut spending by three per cent over the rest of the decade was in the pipeline, diplomats said.

Reuters/Yves Herman

After a short break following a 19-hour session lasting through the night, the bloc's 27 leaders were due to return to the negotiating table at 1200 GMT.

France and Italy have resisted further cuts, while British Prime Minister David Cameron has said that without them there will be no deal.

On Friday officials were indicating that compromise was in the works.

"It is not a fantastic compromise deal but it is acceptable," a French diplomatic source told the AFP news agency.

A draft deal set the 2014-20 actual spending or "payments" at 908.4 billion euros with an absolute ceiling of 960 billion euros for spending "commitments" to the budget.

That would be a 3.0 percent cut from the 2007-13 budget and is less than the 973 billion euros that Cameron and allies, such as the Netherlands, rejected at a budget summit in November.

Collective negotiations broke up just before midnight Thursday for leaders to go into smaller groups to try to hammer out a compromise.

But French President François Hollande, who along with Italy’s Prime Minister Mario Monti has led opposition to further reductions, did not meet one on one with Cameron.

Hollande wanted no change in the Common Agricultural Policy and investment for growth with the European economy depressed and unemployment at a record 26 million.

But, under pressure from eursceptics in his party and outside it, Cameron demanded cuts.

"When we were last here in November, the numbers that were put forward were much too high. They need to come down -- and if they don't come down, there won't be a deal," he said in Brussels.

The British prime minister had already lost sympathy in Europe with his promise of a referendum on the UK’s EU membership.

"We cannot accept a deal dictated by Great Britain, a country we can't even say with certainty will still be in the EU in 2017," Monti reportedly said during negotiations.

Planned spending would be about one per cent of the EU’s gross domestic product.