Cameron has threatened to veto the EU's seven-year budget, fuelling a perception among many in Europe that London is casting itself adrift from the Union.
German officials are exasperated by what they see as London's slide towards Europe's margins, a move underlined by the British parliament's vote last week calling for a real-terms cut in the EU's €1 trillion budget.
Cameron, who wants to stay in the EU and backs a real-terms budget freeze, was humiliated by the defeat and was accused by opponents of losing control over his Conservative party's anti-Europeans, a group that has helped bring down former leaders.
The prime minister said the there should be a separate budget for the EU's crisis-hit, 17-state eurozone currency union, of which Britain is not a member.
"They are proposing a completely ludicrous €100 billion increase in the European budget," Cameron told reporters on Tuesday (6 November). "I'll be arguing for a very tough outcome. I never had very high hopes for a November agreement because you have got 27 different people round the table with 27 different opinions."
Cameron's threat to block a 2014-2020 budget deal could hold up an increase in funding for the poorest new east European member states and further isolate Britain from many disgruntled EU nations.
He has already ruffled feathers in Europe by talking of using closer eurozone integration as an opportunity to repatriate some powers from Brussels.
Merkel said last week that veto threats would not help the EU's budget negotiations. Germany is the biggest net contributor to the budget while Britain, which receives an annual rebate on its payments, is the fourth largest net payer after France and Italy.