British Prime Minister Tony Blair says negotiations on a new European Union budget will be tough because room for maneuvering is very limited.

Mr. Blair spoke after a series of meetings with EU leaders in London Friday. He said any deal must be linked to a review of the bloc's agricultural spending by 2008.

European Commission President Jose Manuel Barroso says he is feels a deal can be reached if all sides make concessions. Mr. Barroso says he is optimistic new proposals to be made by Britain at next week's Brussels summit will help break the deadlock.

Britain, which holds the rotating EU presidency, has suggested cutting $28 billion from the previously-proposed EU budget for the 2007 - 2013 cycle. The newest and poorest EU member states oppose the plan because it would cut projected aid to their countries.

Some information for this report provided by AFP, AP and Reuters.