European Council President Herman Van Rompuy, who is chairing the EU summit in Brussels, broke off the talks shortly after midnight local time, after the heads of state and government had met for only about an hour on Thursday. The leaders then retired to consider revised budget proposals drafted by Van Rompuy.

"Doing more with less money involves political choices. This is painful even when cuts are evenly spread," Van Rompuy told the leaders during the short opening session.

"So we must be sensible and realistic, but we must not forget this budget is a budget for the rest of the decade."

Shortly afterwards, German Chancellor Angela Merkel, who is among the leaders who wants to see cuts to the EU budget, stressed how difficult it promised to be to reach a compromise.

"Whether we can get a result - I have my doubts," the chancellor told reporters. "There will probably have to be another round (summit)," she added.

Even prior to her arrival, the chancellor had expressed scepticism about the prospects for success at this two-day summit. Talks were to resume later on Friday.

Van Rompuy's latest draft for the 2014-2020 budget includes cuts of 80 billion euros ($103 billon) to the European Commission's initial proposal, bringing it down to a total of 973 billion euros.

Veto threat from Britain

This isn't nearly enough for British Prime Minister David Cameron, who used talks with Van Rompuy and European Commission President Jose Manuel Barroso to call for a 200-billion euro cut to the original proposal. Britain has gone as far as to threaten to veto a deal if it does not get its way.

The DPA news agency cited unnamed diplomatic sources as saying that Chancellor Merkel also used her meeting with Van Rompuy and Barroso to call for a cut of around 110 billion.

Other countries that pay in more than they get back from the EU, such as Sweden and the Netherlands, are also looking for cuts. Poland and other eastern European countries are on the opposite side of the argument, fearing cuts to EU subsidies, which benefit their poorer regions.

"Unfortunately, but the British are our opponents today," Polish Prime Minister Donald Tusk told reporters prior to leaving Warsaw.

Also prior to the summit, France repeatedly rejected plans to cut agricultural subsidies, of which it is the main beneficiary.

Despite her scepticism about how long it will take to find a compromise, the German chancellor sounded a note of guarded optimism that a deal would eventually get done.

"The atmosphere is good, that's the main thing," Chancellor Merkel said.

pfd/jr (dpa, DAPD, AFP)