Bilaterals, funding tweaks and 'standing around' to mark EU budget summit

Each of them will already have had a face-to-face meeting with EU president Herman Van Rompuy and EU commission president Jose-Manuel Barroso earlier during the day.

"Everyone is unhappy which gives us the impression that a compromise is possible," remarked one diplomat, referring to a proposal circulated by Van Rompuy last week which chops €20 billion from the payment commitments made (€993.6bn) for the current seven year budget.

"Van Rompuy's people have been very clear that they have a large range of possible tweaks up their sleeves to sort out individual problems," said another diplomat.

Germany - with whom Van Rompuy is said to have worked closely on the proposal - is seen as relatively content. As is Poland.

But plenty of others have directly or implicitly threatened to use their veto. They include the UK, France, Denmark, Austria, Sweden and, lately, Italy.

Specific grumbles include Hungary complaining about losing out on cohesion funds because its GDP has sunk (there is a GDP-linked ceiling for the subsidies), Italy worrying that its contribution to the budget will be too high, Spain wanting more help for its high unemployment rate and Denmark angling for a rebate.

In addition, "the French are not happy at all," said one diplomat, noting that Paris is irritated by proposed cuts to farm and regional subsidies.

Paris is also in the unusual position of not being allied with Germany ahead of the talks. Prior to the last budget deal in 2005, both countries had stitched up agricultural spending between them.

Much of the focus ahead of the talks has focused on the UK. London has been shouting loudest about using its veto, with British MPs last month agreeing that the EU budget must see a cut in real terms.

Connecting Europe and EU officials' salaries

But a mooted attempt to agree a 26-countries only budget - without the UK - is seen as unlikely because it would be both thoroughly complicated and politically damaging.

In addition, the UK has indicated that the Van Rompuy proposal is going in a direction it likes.

"There is slightly more optimism that a deal can be possible," said one diplomat. "I think there is a real prospect of agreement," noted another.

The cautiously positive outlook is also due to the fact that politicians are conscious of the effects of a summit ending acrimoniously.

Difficult decisions on further economic union, due in December, would not be any easier after a big budget fall out.

Meanwhile, Van Rompuy's people are seen as having two paths for manuoeuvre.

One could be chopping money for the €46 billion connecting Europe facility (a pet project of Barroso on boosting transport, energy and internet networks) to which member states are not particularly attached. The other could be further cutting the EU's administrative budget (EU officials' salaries).

"There is a feeling more can be done, not least because of what happened to public sector pay in member states," said a diplomat.

Van Rompuy is due to present a modified proposal on Thursday evening.

"After that who knows. There'll be bilaterals and a lot of hanging around for most of us," continued the diplomat.