President François Hollande dug in his heels against David Cameron's drive to slash the EU budget in Brussels on Thursday, staying away from a meeting with the prime minister and Chancellor Angela Merkel aimed at forging a compromise.

As European leaders joined battle over almost €1tn in EU spending for the seven years up to 2020, Hollande led a troika of France, Italy, and Spain apparently resolved to resist Downing Street.

Cameron met Merkel and the two EU presidents, Jose Manuel Barroso and Herman Van Rompuy, to explore the potential for agreement. Hollande was expected to attend the meeting which went on for more than one hour. When he did not show, Van Rompuy, chairing the summit, repeatedly phoned the French leader to summon him to the negotiation.

"Hollande was not even answering his mobile," said a senior EU official. "The French are playing tough, very tough, more so than in November", when a previous summit foundered on Cameron's insistence on cutting €30bn from the proposed budget.

Despite the Anglo-French clash, all the signs suggested the summit would end in securing a smaller spending blueprint than before, bringing about for the first time in the EU's history a reduction in the seven-year budget.

But Germany, the main paymaster and key mediator was pessimistic about striking a deal. Cameron went into the summit insisting that the outcome had to be lower than the figures presented in November by Van Rompuy. There was already consensus on that.

"There is going to be cuts. The question is how much," said the Latvian prime minister, Valdis Dombrovskis. Sources said Van Rompuy would open the bidding with a figure about €15bn less than that proffered in November.

Hollande said this week that €960bn was his bottom line. And, going into the summit, he said he would question Britain's contested budget rebate.

"It's got to be possible to find an agreement," the French president said. "If certain [countries] are unreasonable, I'll try to reason with them, but only up to a point … we need to have a little clarity in the rebates, cheques, and refunds given to some and not to others and certainly not to France."

Cameron declared that the spending cuts taking place across the different countries had to be replicated in the EU budget.

"The numbers are much too high," he said. "They need to come down – and if they don't come down, there won't be a deal."

The chances were high that the summit could degenerate into a ritualistic exercise in horsetrading, with the various parties fiercely seeking to defend vested and national interests. Germany has conceded that its net contribution to the budget will increase. Merkel said: "The positions are still very far apart … I cannot yet say whether we will succeed."

To complicate things further, Britain is insisting on a different criterion for determining the budget.

The figures presented by Van Rompuy refer to pledges or "commitments" in the project planning for seven years from 2014. Britain uses a different yardstick: that of "payments", referring to the money actually spent, which usually comes out lower. In the seven years till now the gap between the two was €50bn.

Downing Street is demanding that the lower figure be taken as the cap on what may be spent. If there is a deal, it looks as though it will be finessed by using both sets of figures to enable conflicting sides to claim victory from very different positions.

"They will play on the difference between commitments and payments. That will allow France and Italy to claim they have defended their positions and Britain to claim they won," said an EU official.

Another official involved in drafting the proposed deal said: "There's always a gap between commitments and payments. There will be a gap. That's normal."

On the payments figure, Cameron is demanding that "tens of billions" be cut from a November estimate of €942bn. Senior Brussels sources indicated the sum could be reduced to around €913bn, a figure that should allow the British prime minister to claim victory.

But the overall budget has to be approved by the European parliament. Paris and Berlin take the view that there is no point coming up with a budget that does not pass muster in the parliament and condemns the EU to financial disarray.

"We're here today to try to conclude the medium-term financial planning and to make a proposal to the parliament," said Merkel.

Even if agreement were reached on the headline figure, the big fight is likely to be over how to carve up a smaller cake. National and Brussels lobbying will press various claims for farm subsidies, structural funds for the poorest countries and regions, salaries, staffing and administration of the EU institutions, a new kitty aimed at getting the young back to work in areas of the highest unemployment, and infrastructure, broadband, and research investment aimed at spurring growth.

A particular target of the Cameron campaign is the cost of running and staffing the EU, which takes up a mere 4% of the overall budget. The prime minister is calling for savings of €7bn here, by shaving 10% off the salaries bill, curbing special tax rules for EU staff, reducing pensions benefits, and altering the system of automatic promotions.