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LONDON (Reuters) - Britain's David Cameron attacked "ludicrous" European Union budget plans on Wednesday and played down hopes its leaders can reach a spending deal later this month, stepping up the rhetoric before talks in London with Germany's Angela Merkel.
The British prime minister has threatened to veto the EU's seven-year budget, fuelling a perception among many in Europe that London is casting itself adrift from the 27-nation union.
German officials are exasperated by what they see as London's slide towards Europe's margins, a move underlined by the British parliament's vote last week calling for a real-terms cut in the EU's 1 trillion euro ($1.28 trillion) budget.
Cameron, who wants to stay in the EU and backs a real-terms budget freeze, was humiliated by the defeat and was accused by opponents of losing control over his Conservative Party's anti-Europeans, a group that has helped bring down former leaders.
The prime minister said the there should be a separate budget for the EU's crisis-hit, 17-state euro zone currency union, of which Britain is not a member.
"They are proposing a completely ludicrous 100 billion euro ($128.01 billion)increase in the European budget," Cameron told reporters. "I'll be arguing for a very tough outcome. I never had very high hopes for a November agreement because you have got 27 different people round the table with 27 different opinions."
Cameron's threat to block a 2014-2020 budget deal could hold up an increase in funding for the poorest new east European member states and further isolate Britain from many disgruntled EU nations.
He has already ruffled feathers in Europe by talking of using closer euro zone integration as an opportunity to repatriate some powers from Brussels.
Gunther Krichbaum, head of the German parliament's EU committee, warned against the island mentality of states like Britain "who want less Europe rather than more".
"The European Union is not a multiple choice," he said.
Merkel said last week that veto threats would not help the EU's budget negotiations. Germany is the biggest net contributor to the budget while Britain, which receives an annual rebate on its payments, is the fourth largest net payer after France and Italy.
Last December, Cameron vetoed an EU treaty change to enforce stricter fiscal rules in the euro zone. All other member states except the Czech Republic signed a separate treaty instead to get round Britain's move.
France and Denmark have also threatened to block a budget deal to press their interests, highlighting the obstacle course facing EU leaders at the budget talks.
Cameron said he would make his argument for greater EU spending controls "with vigour" when he meets Merkel.
"How can they argue that countries should be cutting spending and taking tough decisions if they're not prepared to take tough decisions themselves?" he said.
Additional reporting by Luke Baker and Charlie Dunmore in BRUSSELS and Stephen Brown in BERLIN; Editing by Paul Taylor