EU Breathes Sigh of Relief as Budget Plans Get Cash Boost

The agreement, which negotiators from the EU's three main institutions struck overnight after hours of tough bargaining, paves the way for final approval of the 2007-2013 spending package in the coming months.

"We have reached the spring thaw after a long cold winter," said Austrian Chancellor Wolfgang Schüssel, current EU presidency holder, referring to a particularly chilly period for the 25-nation bloc.

The half-century-old European club spent most of last year on the brink of crisis, wracked by squabbling over the budget plans while also knocked sideways by French and Dutch rejections of its first constitution.

EU governments hammered out the main framework of a deal at a December summit, overcoming key sticking points including Britain's long-cherished EU rebate and French reluctance to surrender generous farm aid.

But the deal still had to be approved by EU lawmakers, who have been wrangling with the EU's presidency for the last three months to secure more cash from EU governments for key areas, including research and education.

Budget to be increased by two billion euros

After eight hours of debate, negotiators clinched an overnight deal increasing the budget for 2007-2013 by 2 billion euros ($2.5 billion) to 864.4 billion and setting aside a further 2 billion for emergency needs, officials said.

Austria's Schüssel declared the agreement to be a "good compromise" that demonstrated that "Europe is more important than our own interests" -- and also sent a message to increasingly skeptical Europeans. "We have to regain the European citizens' trust," he said.

In December, EU heads of state and government agreed to a total budget package worth 862.4 billion euros over the seven years.

Research and education to get much needed injection

Schüssel said the new version boosted spending on research and development by 700 million euros and training and education programs by 800 million euros. Small and mid-sized companies also got special attention in the new version of the budget as well as foreign policy.

Those policy areas are central to the EU's struggle revive its long-flagging economy, which is at risk of being overtaken by emerging global giants such as India and China.

Economic reform efforts took center stage at an EU summit in Brussels last month -- although they were clouded by recent accusations of resurgent protectionism between key member states including France, Italy and Spain.

Another shadow looming over the EU, highlighted by last year's French and Dutch referendums, is further EU enlargement.

Bulgaria and Romania are due to join in 2007 or 2008, while a row of Balkan hopefuls are also standing in line -- despite clear signs of "enlargement fatigue" among ordinary Europeans after the bloc's 2004 "big bang" expansion.

EU hopeful that vote will see budget plans through

The latest budget deal, providing a ray of hope amid the gloom -- still has to be approved by a vote of the whole 732-member European Parliament, as well as the European Commission and the EU presidency.

But buoyed by the latest deal, EU leaders appear confident that will not be difficult.

European Parliament President Jose Manuel Barroso cited the Beatles song "All You Need Is Love" as a source of hope. "But in the European Union we also need some money, and that's why I really welcome this agreement, because now we have the money for the next seven years," he said.