BRUSSELS, Feb 5: The European Commission wants European Union countries to spend 1.22 per cent of economic output on EU funding in the bloc's next six-year budget period from 2007, officials said on Thursday, as an all-out budget battle looms.

The figure, to be proposed by the EU executive body next week, is near a self-set ceiling of 1.24 per cent of gross domestic product (GDP), and well above the 1.0 per cent demanded by six key EU economic engine states in December.

The Commission's unveiling next Tuesday of its proposals for the EU 2007-13 "financial perspectives" will fire the starting gun on what are likely to be prolonged and hard-fought negotiations on the expanding bloc's spending.

But six net contributor countries - those which generally pay into the EU pot rather than take out of it - launched a pre-emptive strike in December, demanding a freeze on EU spending at 1.0 per cent of GDP.

"One per cent is simply untenable. It seems to us to be incompatible with the ambition of improving Europe's competitiveness," said an official.

He was referring to the EU's so-called Lisbon Agenda, agreed at an EU summit in the Portuguese capital four years ago aiming to make the bloc the world's "most competitive knowledge-based economy" by 2010.

The Brussels budget proposals, to be made by commission chief Romano Prodi in Strasbourg next week, are based on forecast average GDP growth of 2.3 per cent in real terms, said officials.

The budget battle will be all the more stormy as the EU prepares to expand from 15 to 25 members on May 1. Most of the newcomers are relatively poor ex-communist countries in central Europe.

According to officials, the commission is also set to take on Britain over its famous EU rebate on its budget contribution, secured by then-premier Margaret Thatcher in 1984 and controversial among London's EU partners ever since.

The rebate is all the more disputed as enlargement nears, and with it the prospect of impoverished ex-communists handing money to a booming euroskeptic Britain

But rather than doing away with the British rebate, Prodi is expected to propose that all other EU countries also enjoy the same measures, thus ending London's long-guarded privilege.-AFP