Germany is planning to warn the UK that it will seek to cancel next month’s European budget summit if David Cameron, prime minister, insists he will veto any deal other than a total freeze on spending.

Angela Merkel, Germany’s chancellor, does not believe there is any point in holding the budget summit to agree on a seven-year framework for EU spending if the UK intends to veto any deal, people close to the talk say.

Ms Merkel is trying hard to persuade Mr Cameron to back a German compromise that would cap EU spending at 1 per cent of European gross domestic product. Brussels has proposed a figure of more than €1tn for the years 2014 to 2020, or nearly 1.1 per cent of European GDP. After last week’s summit, Mr Cameron bluntly stated his willingness to veto any deal involving increases in EU spending. “If there isn’t a deal that’s good for Britain, there won’t be a deal.”