Cost-conscious EU governments and a more generous-minded European Parliament failed to reach an eleventh hour agreement for the bloc's 2015 budget late Monday, forcing officials to draw up a new proposal.
"No deal on EU budget, EU Commission to present new draft budget 2015," a spokeswoman for the European Parliament's budget committee said in a tweet.
EU member states and the European Parliament have been locked in marathon talks to agree a budget of about 140 billion euros ($173 billion) for 2015.
They are also in need to agree outstanding payments for 2014 -- and even years before that -- with opinions far apart on what needs to be paid urgently.
"We must have a concrete response to the unbearable problem of unpaid invoices accumulating on the desks of the Commission," said liberal European MP and negotiator Jean Arthuis.
Haggling over unpaid bills "puts into danger the credibility of the EU authority and feeds the arguments of europhobes," he added.
With no deal agreed by a 2300 GMT Monday deadline, EU treaties stipulate that the commission, the EU's executive arm, come up with a new proposal, which it will do in the coming days.
Negotiations for the EU's budget are often a heated and drawn out affair, with member state governments under sharp pressure domestically to clip the wings of a Brussels bureaucracy viewed as too extravagant.
Making matters worse this year was an angry row over the recalculation of member state contributions to the EU budget that saw Britain on the hook to pay an extra 2.1 billion euros.
Prime Minister David Cameron refused to pay the top-up, which was due December 1, warning that it could push Britain towards an EU exit.
Britain, along with other angry member states such as the Netherlands and Italy, succeeded in securing a delay until September and to have the payment accepted in instalments.
Despite the agreed delay, the deal still needs the final approval of European Parliament, which will come with the overall agreement for the 2015 budget.
For 2015, the commission has proposed a budget of 140 billion euros, a 3.3 increase from the previous year.
Parliament, eager to expand EU programmes especially in newer and less-developed member states, is pushing for 146.4 billion euros, a 8.1 percent increase from 2014.
Also under discussion are payments to cover years of accumulated unpaid bills, which some estimates put at about 30 billion euros.
Parliament said 4.7 billion euros were needed to cover "urgent costs", while member states are willing to pay only a fraction of that.
Without a deal, beginning January 1 the bloc will be restricted to spend one-twelfth of its current budget per month until an agreement is struck.