Britain is calling for billions of euros in cuts to European Union officials' pay and pensions, a move that has support in Britain and other northern European countries but risks blocking attempts to reach a long-term EU budget deal.
Prime Minister David Cameron, who wants a real-terms freeze in EU spending between 2014 and 2020, is pushing for the EU to cut its wage bill by 10 percent, push officials' retirement age up to 68 from 63 and reduce generous pensions benefits.
The measures would cut around 6 billion euros from the 7-year budget, British officials say, a fractional amount in actual terms but one with heavy symbolic value at a time when all EU countries are struggling to keep budgets in check.
Cameron, trailing in the polls on the back of unpopular public spending cuts and weak growth, said Europe had to reduce "unaffordable spending" if it was to retool its economy.
"That is what is happening at home, that is what needs to happen here," he told reporters as he arrived for a second day of talks on a budget that Cameron has threatened to veto unless there are deep cuts to the proposed 1 trillion euro package.
Officials said it was an issue on which Cameron intended to "hang tough" during negotiations that could run late on Friday.
Cameron's stance has tapped into a rising anti-EU mood in Britain, where a largely Eurosceptic press has for year portrayed the EU as a wasteful bureaucracy filled with staff on overly generous pay packages. It may also appease the anti-EU camp in his ruling Conservative Party.
But he also has tacit support in northern corners of Europe, such as Germany, Sweden, Finland and the Netherlands, where there is an acknowledgement that if the budget is going to be cut, EU administration costs, which account for nearly 63 billion euros, need to come under the knife.
In the latest proposal administration costs are not touched.
However, Cameron's demand for more cuts, coupled with a pledge to protect Britain's cherished annual EU rebate, has upset the European Commission, the EU's executive, and some leaders as they struggle to narrow divisions and reach a deal.
In an email sent to journalists late on Thursday night, the Commission pointed out that the salaries of British civil servants are set to rise by around 1 percent, while Cameron is calling for EU civil servant wages to be cut by 10 percent.
Cameron has countered that about 200 of the Commission's 30,000 employees are paid more than he is -- in excess of 180,000 euros a year.
French President Francois Hollande said he could not accept that "the richest countries come and ask for rebate cheques" -- a direct dig at the money Britain gets back from the budget, most of which is paid by France.
Polish Prime Minister Donald Tusk, whose country is the biggest net recipient of EU funds, said talk of cutting administration costs was a mistake that could block a deal.
"We shouldn't fall into a trap such as when someone says '100 billion or 10 billion of cuts', and pretends it's about administration. This is an effort to block the compromise more than anything else," he said.
British officials played down reports Cameron had had a "bust-up" with Commission President Jose Manuel Barroso when he presented his plan to cut 6 billion euros from administration.
In its proposal, Britain has said that EU workers aged under 58 should have their retirement age raised to 68 from 63, that the total wage bill should be cut 10 percent and that officials' pensions should be reduced from 70 percent to 60 percent of their final salaries, which would save 1.5 billion euros.
Reports in British newspapers said another target for cuts could be a compensation payment given to some EU officials who live outside their home country.
"These are not dramatic changes," one British official said. "The Commission and others are telling the Greeks, Italians and others that they should put the retirement age up to 68."
One concession that was made in the latest draft of the budget plan from Herman Van Rompuy, the president of the European Council, was to raise the hours EU officials must work each week to 40 from 37.5.
(Additional reporting by Catherine Bremer; Editing by Luke Baker)