UPDATE 4-EU leaders fail to break deadlock over long-term budget

A European Union summit ended abruptly on Friday after leaders failed to reach agreement on the bloc's long-term budget, following a two-day stand-off between poorer countries and "frugal" member states seeking to rein in spending.

Summit chairman Charles Michel gathered the 27 national EU leaders together at the end of the day to bridge divisions, but rival camps rejected his compromise plan. Setting the seven-year budget is always a tug of war, but it is fiercer than ever this time because Britain's exit from the EU last month has left a 75 billion euro ($81 billion) gap at a time of costly new challenges from climate change to migration.

The standoff over the size of the 2021-27 budget and how to carve it up has exposed rifts between countries in the north and south, between east and west, and between more developed and less advanced economies. Denmark, Austria, Sweden and the Netherlands - dubbed "the frugal four" - arrived to the talks adamant that they would not accept a budget of more than 1% of gross national income.

Beneficiaries of the joint budget, meanwhile, were asking for more than the previous proposal of 1.074%, equivalent to 1.09 trillion euros ($1.2 trillion). Michel's proposal would have capped joint spending at 1.069% of the continent's economic output, but this was immediately rejected when he brought the leaders around the table to put it to them.

"Unfortunately we have observed that it was not possible to reach an agreement," he told a news conference minutes later. "We have observed that we need more time."

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