Cameron vows to fight for the best deal for British taxpayers

The Prime Minister declined to say whether he was urging her to back the real-terms budget cut that MPs voted for last week.

Mrs Merkel refused to say whether she would even support a freeze, which Mr Cameron is pressing for at a crunch summit later this month.

But, ahead of their meeting, Mr Cameron said they were “both believers that European countries have to live within their means, as well as the European Union”.

Asked whether he would be urging his German counterpart to support a cut or a freeze in the EU budget, he said: “I believe it would be wrong for the European budget to increase at a time when we are having to make difficult decisions not just in Britain but all over the European Union to get our budgets back to balancing.

“That’s why I’ve said it should be at best a cut, at worst a freeze.

“Whatever the discussions we have today I will be trying to get a good deal for the British taxpayer, a good deal for Britain, one that I can put before the British Parliament, one that I can put before the British people.”

Speaking through an interpreter, Mrs Merkel said European leaders always had to “do something that will stand up to public opinion back home”.

“Not all of the expenditure that has been earmarked has been used with great efficiency... We need to address that,” she said.

But pressed as to whether she would support a budget freeze, she added: “I beg leave to first discuss this with the Prime Minister.

“What is in my interests is that we use our money effectively.”

Ahead of their meeting, Mr Cameron admitted he did not have “high hopes” of securing a deal between all 27 member states, meaning he could veto the budget.

Mr Cameron has vowed not to return from the summit with anything less than an inflation-only increase – arguing that though he would prefer a real-terms cut, it was unrealistic to expect to get agreement.

Last week he suffered a humiliating Commons defeat when Tory Eurosceptic rebels joined forces with Labour to back a non-binding motion calling for him to enter negotiations with that harder line.

Speaking in Abu Dhabi, Mr Cameron said he would take a “very robust and strong argument” for a deal in Britain’s interests and that forced the Commission to match cost-cutting in member states.

Mrs Merkel was among European leaders to sign a letter in 2010 backing a real-terms freeze and the Prime Minister said the arguments were now “even more powerful” in light of continued economic woes.

“I believe everyone who signed that letter should stick to that letter,” he told reporters.

“I have always wanted at best a cut, at worst a freeze,” he added.

“We have a rebate, we are keeping that rebate. But over and above that rebate I also want to see a good budget outcome for the UK.

“I think if you see what’s happened in Europe since 2010, deficits and debt levels overall have got worse rather than better so I think the arguments we made then are even more powerful today.”

Any deal agreed at the summit would have to be put to the Commons for approval, leaving Mr Cameron – who has publicly threatened to use the UK’s veto – with very little room for manoeuvre.

The Prime Minister said the Commission’s proposed budget increase amounted to 100bn euro (£80bn) and was “completely ludicrous” – accusing Brussels of “doing nothing” to tighten its own belt.