A major meeting to decide whether the EU should cut its spending is taking place on Thursday. Influential member states are divided, and Merkel has warned that further meetings might be necessary.
European Union leaders are set to take part in a controversial meeting in Brussels on Thursday to decide the bloc's seven year budget, amidst growing pressure for the organization to approve a spending cut.
If a cut is agreed at the two-day meeting, it will be the first in EU history. Senior EU officials have stated that if a deal is not brokered, it could prompt a renewed crisis and endanger the eurozone.
"We believe a real terms cut in the overall ceiling is necessary," an EU official, who wished to remain anonymous, told the Reuters news agency.
"The consequences of no deal would be serious, and we don't see how a different timeframe would result in a game-changing proposal," the official added.
But German Chancellor Angela Merkel delivered a sobering warning on Wednesday that an agreement may not be reached this week, and the EU may have to organize another summit early in the new year if talks fail to bear fruit.
"I don't know if we will be able to reach a conclusion tomorrow or the next day," Merkel told the German parliament.
"If necessary we will have to meet again at the beginning of next year," she said.
A divided Union
Some contributors to the EU budget, including Germany and Britain, support cuts to the tune of at least 100 billion euros ($128 billion).
European Council President Herman Van Rompuy has also backed a cut, albeit a less severe one, which would reduce the planned budget by 80 billion euros.
But other influential member states, including France and Poland, have voiced opposition to reductions that directly affect their interests. They benefit substantially from budget funding allocated to farm subsidies and development aid for the EU's poorer states. Three quarters of the EU budget is currently channeled into these two areas.
If the budget talks in Brussels fail, it will be the second time this week that a major meeting in Europe has failed to achieve results. A meeting between eurozone finance ministers on Wednesday failed to bring about an agreement over a new tranche of aid to struggling Greece.
Britain has also threatened to use a veto if the EU does not agree to freeze spending.
sej/slk (dpa, Reuters)