European Union leaders will need to agree a first-ever cut in the bloc's long-term spending plans if they are to clinch a deal at a summit starting on Thursday, with the drive for austerity likely to trump all other concerns.

German Chancellor Angela Merkel played down the chances of an agreement this week, even though senior EU officials warned that failure could lead to a renewed crisis and derail efforts to shore up the euro zone.

Officials preparing the meeting, which could drag into the weekend in the search for a breakthrough, said substantial cuts in spending for 2014-2020 compared with the current 7-year budget framework were the only viable basis.