Prime Minister David Cameron today insisted that Britain will “stick to our guns” over the EU budget, as the scene was set for weeks of wrangling leading up to a crunch summit next month.
The European Commission is seeking a one trillion euro budget for the period 2014-20, equating to 1.1% of the 27-nation bloc's gross income.
But Mr Cameron insists that there must be no increase above inflation, and has made clear he is ready to wield the UK's veto to block a deal which is not in Britain's interest at the Brussels summit on November 22-23.
Germany is understood to be hoping to persuade Mr Cameron to accept a compromise deal which would cap EU spending at 1% of gross income.
But Berlin today denied reports that Chancellor Angela Merkel was planning to threaten to have the summit cancelled if the Prime Minister refused to show flexibility.
Mrs Merkel is due to visit Mr Cameron at 10 Downing Street on November 7, when the row over the budget is likely to top the agenda.
Aides today declined to say under exactly what circumstances the PM would invoke the UK's veto, saying that negotiations over the budget were still to take place.
Speaking to the House of Commons today, Mr Cameron said he wanted a "rigorous settlement", adding: "We have not put in place tough settlements in Britain in order to go to Brussels and sign up to big increases in European spending. I don't think German voters want that any more than British voters."
He pointed to a joint letter he signed with Mrs Merkel and the leaders of France, the Netherlands and Finland in December 2010, in which they argued for below-inflation rises in the EU budget.
Since that point, the debt crisis facing many EU governments had got worse, said the PM, adding: "The pressure to make sure that we deliver a sensible settlement for the European budget has got even greater and that's why we will be sticking to our guns."
Speaking in Brussels last Friday, Mr Cameron said a "huge" increase in EU spending would not be "acceptable" at a time when national budgets are being cut.
"If there isn't a deal that is good for Britain, if there isn't a deal available then there won't be a deal," he said.
The PM's official spokesman declined to put a cash figure on the maximum increase which would be acceptable to the UK.
"The Prime Minister has made it clear that he is willing to do a deal on the budget in November, so long as that is the right deal for British taxpayers," said the spokesman.
"We have said that we don't see a case for increases in spending above the rate of inflation."
Public debt across the EU is 50% higher in 2012 than it was in 2007, and member-states are planning spending cuts averaging 8% between 2010 and 2014, said the spokesman.
"This is a time when many countries are having to take some very difficult decisions and that should be reflected in the discussions we are having in the EU on the budget," he said.
The dispute over the budget is set to dominate talks between Mr Cameron and European Council president Herman van Rompuy in Downing Street on Thursday.
Labour leader Ed Miliband accused Mr Cameron of "losing control of his party over Europe" and harming the UK's influence in Europe by becoming isolated, even from traditional allies.
He cited Finnish Europe minister Alex Stubb, who said that Britain was "putting itself on the margins" and saying "bye bye" to the EU.
Even Mr Cameron "can't be glorying in fisticuffs with Finland", said Mr Miliband. "It's the land of the Helsinki Accord, reindeer and the Moomins. Their Europe minister is an Anglophile, he's one of Britain's friends.
"The Prime Minister doesn't seem to realise that all his bluster about fighting for Britain is meaningless if he alienates our natural supporters.
"He really has become the guy who goes to Europe and picks a fight in an empty room, which is just as well because he normally finds himself in an empty room."