French President François Hollande and British Prime Minister David Cameron met Friday for face-to-face talks on the European Union budget, a French source told AFP.

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The meeting, also attended by Dutch Prime Minister Mark Rutte, took place on the second day of an EU summit called to agree the bloc's trillion-euro budget which leaders fear could end without a deal.

Cameron, who is leading a push by austerity-minded nations for cuts in the EU's 2014-2020 budget, arrived for a second day of cuts saying not enough was being done to reduce EU spending.

"I don't think there has been enough progress," said Cameron.

"It isn't a time for tinkering, it isn't about moving money from one part of the budget to another. We need unaffordable spending cut. That's what is happening at home that's what needs to happen here," he told reporters.

Sweden and the Netherlands also favour belt-tightening in Brussels, as do several others including Austria and Finland who are net contributors to the EU budget – nations that put more money into EU coffers than they receive.

Tensions between those nations and other EU states which receive more than they donate are threatening any chance of a deal at the summit.