Merkel warns on tough 2014-20 budget talks

Berlin/London - German Chancellor Angela Merkel warned Saturday that difficult negotiations lay ahead next week on the EU's 2014-20 budget, while British Prime Minister David Cameron - a linchpin in the talks - appeared more optimistic.

"Germany will try to contribute to a result. But whether we will succeed, that we can only see at the end of next week," Merkel said in her weekly video message.

Cameron, however, is "hopeful" that European Union leaders will strike a deal when they meet in Brussels on Thursday and Friday, a government source told the Press Association.

The source said the premier feels he has a "strong alliance" with other net contributors to the budget - notably Denmark, the Netherlands and Sweden - and is counting on "support" from Germany.

EU leaders failed to reach an agreement when they tackled the budget for the first time in November.

The European Commission has proposed a maximum of 1.09 trillion euros (1.49 trillion dollars) in spending commitments over the seven years, arguing that EU investment is key to boost growth.

But EU President Herman Van Rompuy has suggested cutting the proposal by 80 billion euros in a bid to find a compromise among the 27 member states - many of who want spending reined in to reflect the austerity they have had to implement domestically.

EU leaders will use Van Rompuy’s proposal as a starting point for their negotiations next week, diplomats said. Britain has been most vocal in advocating for even more cuts, with Cameron demanding that spending be frozen at 2011 levels.

Germany will do everything possible to reach an agreement, Merkel said, while also noting that her country has its own interests. "Germany belongs to the large net contributors in the EU, and that is why it is especially important for us that the means are used to ensure a more competitive EU with a stronger performance," she said.