Budget Commissioner Janusz Lewandowski said he expected tough negotiations over his plan to raise spending to €132.7 billion, a target which must now be jointly approved by EU governments and the European Parliament.
Germany, Britain, France, Finland and the Netherlands are strongly opposed to any above-inflation increase in the budget, a stance that has forged division in the EU, with richer northern countries split from some southern and eastern ones.
"Some ask why we would increase the EU budget when member states face severe austerity measures at home; this is a legitimate question," Poland's Lewandowski acknowledged.
"The main reason for the increase is that we must pay the bills coming from projects from across Europe," he said, referring to EU infrastructure grants for poor regions, and funds for research and innovation projects.
The proposal faced almost immediate opposition from some of the EU's 27 governments, with Britain, a large net contributor to the budget and a country which is enforcing strict spending cuts domestically, saying the increase was unacceptable.
"We want the best deal for the UK taxpayer and a 4.9% increase in the annual EU budget is not acceptable," said a British government spokesman in Brussels.
"We'll be working closely with other member states to drive the hardest possible bargain."
Late last year, Britain, Germany and France demanded the long-term EU budget be frozen until at least 2020, to ensure the bloc's spending reflected the cuts being made to public spending at national level.
But they face strong opposition from Poland and other net recipients of funds from the budget when talks start on the next long-term budget, which runs from 2014 until at least 2020.
An above-inflation spending rise in 2012 could also fuel growing public opposition to the EU in parts of Europe, adding to the resentment felt at the hundreds of billions of euros in taxpayer funds being used to bail out eurozone countries such as Greece and Ireland.
With Eurosceptic parties seeking to use rising anti-EU sentiment to their advantage, as Finland's True Finns party did in a parliamentary election on 17 April, many governments could also see the proposal as an electoral threat.
"How can we explain to our citizens who are tightening their belts that the European budget simply keeps on growing?" Dutch Finance Minister Jan Kees de Jager said.
"In the coming months I will work hard towards a substantially lower European budget than proposed by the Commission today," he said.
More than two thirds of EU budget spending goes to subsidise farming and for structural projects such as road building.
The Commission has proposed cutting money from underperforming programmes next year and freezing its own spending on administration at 2011 levels, in a bid to keep the budget increase to a minimum, Lewandowski said.
A rise is inevitable though, he said, as funding commitments will increase as the EU enters the penultimate year of the current spending period, and a rise of less that the proposed 4.9% would result in a breach of existing contracts.
Last year, the Commission proposed a 5.9% rise in EU spending for 2011, but the increase was eventually capped at 2.9% following a long tussle with EU governments, a battle led by Britain with backing from several others.
Talks on spending in 2012 are seen as a prelude to much tougher negotiations for the EU's next long-term budget from 2014, which will get underway when the Commission makes proposals later this year.
(EurActiv with Reuters.)