7 February 2013 Last updated at 17:04 ET
EU budget summit wrestles over cuts
EU leaders have begun budget negotiations hours later than planned, amid deep divisions over spending priorities for the next seven years.
The Brussels summit chair, Herman Van Rompuy, urged them to compromise and keep the EU budget focused on growth, innovation and creating jobs.
The two-day summit aims to reach a deal that eluded the leaders last November.
British Prime Minister David Cameron says he will not accept a deal unless further cuts are made to the draft.
He said the figures being proposed for 2014-2020 "need to come down - and if they don't... there won't be a deal".
Any one of the 27 member states can veto a budget deal - a fact which makes the negotiations all the more difficult.
Earlier on Thursday leaders explored possible compromises in small groups.
Clash of priorities
The summit pits Mr Cameron and some northern European allies - who want EU spending reined in tightly - against mostly eastern and southern European countries who want to protect the big budget areas of agriculture and cohesion funding for the poorest regions.
France's President Francois Hollande, a socialist, champions European "solidarity" and opposes the deeper cuts urged by Mr Cameron. Mr Hollande signalled some readiness to compromise, but said he would not accept a budget that "disregards agriculture and ignores growth".
France is the biggest beneficiary from the EU's Common Agricultural Policy, which accounts for about one-third of the entire budget.
Mr Cameron met his counterparts from Denmark, the Netherlands and Sweden - leaders who are potential allies in the tough negotiations.
Mr Cameron also had a separate meeting with German Chancellor Angela Merkel, Mr Van Rompuy and EU Commission President Jose Manuel Barroso. President Hollande failed to turn up for that meeting because of "scheduling difficulties", UK officials said.
The Commission - the EU's executive body - had originally wanted a budget ceiling of 1.025tn euros (£885bn; $1.4tn) for 2014-2020, a 5% increase. In November that ceiling was trimmed back to 973bn euros, equivalent to 943bn euros in actual payments.
But with other EU spending commitments included, that would still give an overall budget of 1.011tn euros.
The UK, Germany and other northern European nations want to lower EU spending to mirror the cuts being made by national governments.
An EU source told BBC News any extra cut would probably be made to growth-related spending in areas such as energy, transport, the digital economy and research.
The biggest spending areas - agriculture and regional development - are largely ring-fenced because of strong national interests, the source said, speaking on condition of anonymity.
The budget amounts to about 1% of the EU's overall GDP - it is dwarfed by the combined national budgets.
Parliament's voice
The BBC's Europe editor Gavin Hewitt notes that whatever is agreed has still to go to the European Parliament, and MEPs are big backers of EU spending.
On Twitter the parliament's president, German socialist Martin Schulz, warned that "funding for food banks is to be cut by half, even though they are providing more and more people with their only meal of the day".
And he warned the EU leaders that MEPs would reject an austerity budget that cut "the investment which people now need more than ever".
The summit was to have begun at 14:00 GMT on Thursday, but the formal session did not get under way until 19:45.
Mrs Merkel - seen as the main powerbroker in the summit - has already acknowledged that the talks will be "very difficult".
A European Parliament spokesman warned that more staffing cuts would leave the EU Commission unable to do its job, as EU institutions integrated further and took on new responsibilities in response to the debt crisis.
"How can we imagine that an EU institution can ensure a proper banking union with a budget that is cut by whatever billions in figures we hear, here and there?" said spokesman Olivier Bailly.
The split in the EU reflects the gap between richer European countries and those that rely most on EU funding.
The argument for higher spending is supported by many countries that are net beneficiaries, including Poland, Hungary and Spain.
Others, mostly the big net contributors, argue it is unacceptable at a time of austerity. Germany, the UK, France and Italy are the biggest net contributors.
Failure to reach agreement on the seven-year budget would mean the EU rolling over annual budgets - a method that would be more expensive and would complicate long-term projects. BBC
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