The parliament also called on Tuesday for more money to finance future EU enlargement, research and development and common foreign policy.

Leaders of the political blocs in the EU assembly stopped short of openly threatening to veto the deal, reached after two days of tense negotiations early on Saturday, but said they would demand more concessions from EU governments.

The lawmakers also criticised Tony Blair, the British prime minister, whose country has held the rotating EU presidency for six months, for failing to end the current EU crisis and lead Europe forward.

Hannes Swoboda, vice-chairman of the Socialist group, said: "Do you think there is enough pre-accession funding for Croatia and Turkey? I don't think so.

"On research and development too this budget falls short of what we need to take Europe forward. This budget is unacceptable to us and we want some concessions."

The EU Parliament has veto power over the budget.

Negotiations between the assembly and member states on the final shape of the spending plan for 2007-2013 are likely to continue into next year, although the house has limited room for manoeuvre, and the budget cap negotiated by the member states on Saturday is unlikely to be increased.

Blair's defence

Blair was in the parliament to deliver his final report on Britain's EU presidency which ends in less than two weeks.

During a summit in Brussels last week, EU leaders approved a final budget blueprint when Blair offered to cut Britain's lucrative rebate and turn the savings over to the 10 countries that joined the now 25-member bloc last year.

Tony Blair said the budget was
the best for the time being

In exchange for agreeing to the deal, Blair asked members of the bloc to agree to a spending review in 2008-09 that could lead to cuts in massive agricultural subsidies.

France, however, is hesitant to agree to cuts until after 2013. It is the top recipient of EU farm handouts.

The seven-year financial package of 862.4 billion euros ($1.04 trillion) corresponds to 1.045% of the bloc's gross national income.

But the EU assembly had demanded a package that would be 100 billion euros higher - or 1.18 of GNI - arguing that Europe needs more money to be able to adapt to the challenges it is facing.

Budget deals

Graham Watson, leader of the Liberal Democrats in the EU assembly, said: "If parliament was to vote on your budget deal we would reject it, but we will not vote today.

Between 1.045 and 1.18 there's room for quite a lot of negotiations, for example to ensure parliament's demands for greater flexibility part on foreign and security policy spending and require national governments to openly declare how they use their funding,".

"There was a tremendous willingness to contemplate a bigger budget"

Tony Blair

Blair told the parliament the budget deal struck on Saturday was the best that could be achieved under the present circumstances and called it a fair settlement for the time being. He said EU leaders would have agreed to a bigger budget for 2007-2013 if it had been more ambitious, and urged serious reform of the spending plan in 2008-09 to ensure it meets the needs of a changing Europe.

"There was a tremendous willingness to contemplate a bigger budget. Overall, in my view, it was a budget that, as ever with these budgets, there will be people who will say it should be lower, there will be people who say it should be higher," Blair told the EU assembly.

"But I think, and we thought as the heads of government, that it represented a fair settlement for the present time."

Globalisation

Blair said the bloc must now concentrate on tackling the challenges of globalisation, which requires an EU with a complete single market including opening-up of the services sector, a European economy focusing on innovation, new technology and research and development, and future EU enlargement.

"One of the best things that has happened to Europe has been the arrival of former central and eastern European states that come in as thriving and vibrant democracies," Blair said.

He said the economy, illegal immigration, terrorism and the environment were other issues the EU must focus on.