* EU exec proposes 2.9 percent increase
* Tries to meet some of euro parliament's demands
* Last-ditch budget talks in December
* EU commissioner says more optimistic deal will be reached
(Updates with budget commissioner's news conference)
By Marcin Grajewski
BRUSSELS, Nov 26 (Reuters) - The European Union's executive
arm proposed a new 2011 draft budget on Friday to try to break a
deadlock between the bloc's parliament and governments over
spending plans.
Negotiations between the European Parliament and the EU's 27
governments on the budget, worth 123 billion euros ($164
billion) in 2010, collapsed this month, threatening to throw the
bloc's financial planning into disarray.
The European Commission proposed a 2.9 percent rise compared
with this year -- an increase that parliament accepted following
pressure from governments eager to hold down spending as they
are having to do at home.
Legislators had initially sought a 6.2 percent increase but
dropped that demand in the face of fierce opposition.
The Commission also tried to meet some of parliament's
demands for a greater say in future negotiations on spending.
Further talks will now follow, culminating in a meeting of
EU finance ministers on Dec. 16 and a summit of heads of state
and government scheduled on the same day.
"We are now more optimistic that there will be deal before
the end of the year," EU Budget Commissioner Janusz Lewandowski
told a news conference.
Previous talks failed when Britain, Sweden and the
Netherlands rejected legislators' demands for guarantees over
future EU financing and a declaration that would clarify their
role in the bloc's financial planning under a new Lisbon treaty.
Parliament demanded more flexibility in the way the budget
is spent and guarantees that lawmakers will be represented
during negotiations on the EU's next, long-term budget after
2013, which could be worth 1 trillion euros. They also asked for
a debate on giving the EU an independent source of income.
Diplomats say that, in parallel, France and Germany were
pressing Britain to drop its tough stance.
One diplomat said envoys from EU governments agreed on
Thursday to meet the parliament's demand on flexibility, but not
other requests.
Failure to agree on the budget would be another sign of the
EU's negotiating difficulties at a time it is scrambling to
agree on a permanent bailout mechanism for euro zone countries
facing financial problems.
Unless a deal is reached, next year's spending will be the
same as in 2010, inflexible and disbursed in 12 equal
instalments. Some programmes will be denied funding, such as the
EU's fledgling diplomatic service, nuclear fusion project ITER
and newly created bodies to supervise financial markets.
More than two-thirds of the EU budget goes on aid to poor
regions and farm subsidies. The remainder is spent on research,
foreign aid, internal security and administrative costs. The
budget represents about 1 percent of the EU's economic output.
(Editing by Rex Merrifield, John Stonestreet)
