* British PM Cameron formed alliance to cut EU budget
* EU agrees 7-year budget deal
* Cameron faces tough battles ahead over Britain's EU ties
* UK wants to reform EU role and hold membership vote
By Peter Griffiths
BRUSSELS, Feb 8 (Reuters) - British Prime Minister David Cameron won praise from his party's anti-EU camp with a successful fight to cut the European Union budget, but tougher battles lie ahead when he seeks to win back powers from Brussels before a vote on Britain's EU membership.
Supporters hailed the outcome as an "historic victory" for Cameron, comparing it to former Conservative leader Margaret Thatcher's winning of concessions from Europe at fiercely contested summits in the 1980s.
Cameron, trailing in the polls and threatened by anti-EU rivals before a 2015 election, needed a win in Brussels to restore his authority on Europe and within his fractious party.
The opposition Labour Party said his January pledge to claw back powers from the EU and give British voters a referendum on leaving the bloc had left him "weak and isolated" in the EU.
After leaders secured a deal for a long-term EU budget worth close to 1 trillion euros ($1.34 trillion), Cameron stressed his success in forging alliances with the Netherlands, Denmark, Sweden, and, to a lesser extent, Germany.
"That is not isolation. That is Britain actually with allies, getting things done in Europe and coming with good results," he told a news conference.
Crucially for a domestic audience, Cameron protected Britain's rebate, a prized refund from the EU to London secured by Thatcher worth 3 billion pounds ($4.75 billion) a year.
One leading Eurosceptic Conservative lawmaker, Douglas Carswell, said Cameron deserved "three hearty cheers".
Taking the gloss off the deal was the news that Britain's net contribution to EU funds will still rise to help pay for new members of the bloc.
While Cameron won this round of the EU debate, it came at the expense of again upsetting France and some other European neighbours. French President Francois Hollande vehemently opposed Cameron, warning that cuts would damage the recovery.
British officials said Hollande failed to turn up for a scheduled meeting with Cameron at the talks -- an assertion promptly dismissed by the French. The denial did not stop British newspapers talking about "Le Snub".
More trouble for the budget lies ahead at the European Parliament, which must approve the plan. Its Deputy President Othmar Karas said it would stifle growth and must be blocked.
Despite offering some support to Britain on the budget, German Chancellor Angela Merkel will be a far more formidable obstacle on the repatriation of powers to London in areas like employment law, crime and social welfare. One of her senior ministers has said Cameron will not be allowed to "cherry pick".
"Merkel thrives on her role as a broker," said Raoul Ruparel, of the eurosceptic think tank Open Europe. "The lesson for the UK is that win enough support for your position among like-minded member states and Germany will back you."