Talks to agree the European Union's budget for next year broke down amid rows involving among member states including Britain sparking a new funding crisis.
Eight hours of negotiations in Brussels ended in walkouts after MEPs refused to drop demands for an extra £13.8 billion in European Union spending for this year and 2013.
The failure of the talks casts a fresh doubt on whether a major summit to agree to the EU's future funding from 2014 to 2020, scheduled for later this month, can go ahead.
There had already been speculation that the summit would be cancelled because David Cameron was refusing to drop his threat of using Britain's veto to block any future increase above the level of inflation.
Friday night's deadlock was over demands by the European Commission for a £7.3 billion spending increase by the end of this year to meet a funding shortfall, figures that are disputed by Britain and other governments.
At the same time, the European Parliament wants to reinstate over £6.5 billion in funding that had been cut by governments from next year's budget to reflect national austerity programmes.
The two demands, for this year and next, would increase Britain's EU contributions by £1.6 billion at a time of deep cuts to public services domestically.
During the acrimonious negotiations, Greg Clark, the Financial Secretary to the Treasury, attacked the commission for asking for extra 9.65 per cent in funding for this year almost 11 months into 2012.
"Ordinary working people, whether in the UK or elsewhere, cannot be asked to pay more to Europe when they are enduring cuts at home.
"We have made it clear that we want to see the annual budget cut in real terms and certainly not increased. That remains our view for 2012 and 2013."
The negotiations had been scheduled to finalise spending for 2013 but they began to break down before they even began over an amending budget for this year.
Alain Lamassoure, the French MEP who heads the European Parliament's budget committee, said that governments "were unable to negotiate so the negotiations were suspended."
"The European Commission will now have to present a new proposal to enable talks to resume," he said.
Jeroen Dijsselbloem, the new Dutch finance minister, said he did not believe the commission's claim that the EU would be unable to pay its bills without the extra money.
"I'd question that very much. The Commission has to re-prioritise, that's just the way it is. Budgetary discipline is not just for the member states," he told Reuters.
Peter Tempel, Germany's permanent representative to the EU, echoed British and Dutch complaints. "We take the view that implementation of the budget in 2012 is not a basis for claims made by the Commission," he said.
Talks could now resume on Tuesday.