The West

German Chancellor Angela Merkel says the European Union will need to hold a new summit on its budget in early 2013 if the bloc's leaders fail to agree this week on a 2014-2020 spending plan.

"I don't know if we will have a definitive deal tomorrow or the next day - we want that," Merkel said during a debate on Germany's own budget on Wednesday.

"If necessary we will have to meet again at the beginning of next year."

European Union (EU) president Herman Van Rompuy says he will draft a fresh proposal on the bloc's contested trillion-euro budget in hopes of saving an extra-ordinary summit this week from collapse.

In an invitation to the EU's 27 leaders, Van Rompuy pledged "a revised version" of controversial proposed cuts to the EU budget for 2014-2020 to be considered when leaders begin the two-day talks on Thursday evening (European time).

Meanwhile French President Francois Hollande on Wednesday told his cabinet he hoped the European Union would come to a "compromise" on the bloc's contested trillion-euro budget being discussed at a summit this week.

Austerity-driven nations are demanding huge cuts to EU spending to match domestic belt-tightening for the 2014-2020 budget but face opposition from poorer nations to the east and south who benefit from the Brussels budget.

"The president hopes that Europe will come to a compromise as Europe must have a budget," government spokeswoman Najat Vallaud-Belkacem quoted Hollande as telling a cabinet meeting.

She said he had made "several contacts" with leaders ahead of the two-day summit, and would take up a "resolutely European and balanced approach" there.

Britain is seeking to secure a cut of up to 240 billion euros ($A298.69 billion) in the 2014-2020 budget.

EU head Herman Van Rompuy, who will broker the talks, last week suggested a 75-billion-euro cut to the proposed 1.047 trillion euros ($A1.30 trillion) budget but that made no one happy.

Italy, one of 11 net contributors to the EU budget, has been demanding the end to rebates and discounts enjoyed by Britain, Germany, Sweden and the Netherlands and has said it will veto the budget if it went against Rome's interests.

The West Australian

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