Brussels: European Union leaders have reached a deal on 960-billion euro (USD 1.3 trillion) budget for the next seven years, averting a stand-off over 27-nation bloc's future spending.
The agreement hammered out after two days of tough negotiations at a special summit here is a compromise between northern European countries, including Britain and Germany, who pressed for a sharp reduction in the EU spending from 2014-20, and those fiercely opposed to any cuts.
The heads of state and governments of the 27-nation bloc agreed to reduce EU long-term budget by around 3.3 per cent, from the current 2007-2013 budget for the first time.
They also agreed to cap actual spending at 908.4 billion euros and to reduce the spending on agriculture and regional development, which traditionally receive the largest share of funds from the EU.
European Council President Herman Van Rompuy hailed the agreement on the next budget and said it will be a balanced and growth-oriented budget that is realistic and driven by pressing concerns.
"It was not an easy task; this was our single longest meeting so far in my mandate, but it was worth working for this result," he said in a statement. "The compromise shows a sense of collective responsibility from Europe's leaders."
The dispute over the next budget had threatened to cause a new split in the EU and to reignite the debt crisis, after the last budget summit in November broke down.
The opening of the summit on Thursday was delayed by around six hours as the EU leaders struggled in smaller groups to narrow down their differences and the breakthrough came after an all-night session.
The European Commission had originally proposed a budget of 1,09 billion euros for the next 7 years, a 5 percent increase over the current level, but that was scaled down to 973 billion euros at the last summit under pressure from north European countries, which contribute more to the EU than they receive.
They insisted that the EU spending must be reduced to match the spending cuts in the national budgets of several member nations.
British Prime Minister David Cameron, who took the centre-stage of the budget dispute by demanding drastic reduction in the next seven-year spending, presented the deal as his victory.
He said he wanted to set a budget limit "that would deliver a cut in actual spending over the next seven years and that has been achieved".
He had hoped to slash the budget to 885 billion euros and insisted ahead of the summit that he would not sign up unless further cuts were made.
Under the EU rules, a decision on the budget must be unanimous.
The British people can be happy that "we cut the European 7-year credit card limit for the first time ever", Cameron told a news conference.
As a result, the EU budget would cost Britain less than 1 percent of Europe's national income, he said.
The next budget will also reduce the EU spending to finance its Common Agricultural Policy and will "enable the union to do things it should in a way it can afford", Cameron said.
"It will promote growth, encourage research and development and will help the newest members to make for the decades which they lost under the communism," he added.
He said he also successfully fought off attempts to undermine the rebate which Britain receives from the EU and ensured that "the rebate is safe".
French President Francois Hollande spoke of a "good compromise", even though the budget cap agreed was lower than 913 billion euros he wanted.
French demands have been met to a large extent. "We can say that we have achieved our goals," he told a news conference.
Above all, France could safeguard its EU subsidies in the agricultural sector, he said.
France is one of the main beneficiaries of the common agricultural policy.
German chancellor Angela Merkel welcomed the agreement as "good and important".
It provides clarity for the planning and execution of various important projects, she said, adding it is also an expression of solidarity among the EU member-nations.
Out of the 960 billion euro budget framework agreed, 373.5 billion euros is earmarked for the agriculture sector, 47 billion euros less than in the current budget.
The second largest share of the budget amounting to 324.7 billion euros will be given to finance the structural funds.
Allocations to finance investments in the areas of fostering growth, competitiveness and employment will be raised from 34 billion euros to 125.7 billion euros.
A total of 61.6 billion euros has been earmarked for financing the EU administration while 58.8 billion euros will be given to support the union's development aid programmes and its foreign policy projects.