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Europe

EU leaders agree to historic budget cut

Bloc slashes seven-year budget down to $1.28 trillion - cut of about three percent - for first time in its history.
Last Modified: 09 Feb 2013 00:40

European Union leaders have agreed to a significantly reduced seven-year budget worth $1.28 trillion - the first cut in spending in the 27-member group's history.

"Deal done!" Herman Van Rompuy, European Council president, announced on Twitter on Friday after more than 24 hours of tough talks between the bloc's 27 heads of state and government.

The final deal sets spending "commitments" for the next seven years between 2014-2020 at $1.28 trillion, but the actual spending will be capped at the lower total of $1.21 trillion - it's an historic three percent drop on the previous seven-year budget cycle.

At a news conference shortly afterwards, battling to stay alert after nearly 36 hours awake, Van Rompuy said the agreement was a budget of moderation that reflected straightened times.

"We simply could not ignore the extremely difficult economic realities across Europe, so it had to be a leaner budget," he said.

"For the first time ever, there is a real cut compared to the last multiannual financial framework."

The deal must now be approved by the European Parliament, where leading legislators have already expressed opposition.
Securing parliamentary approval is likely to take several months.

It will be the EU's first austerity budget in six decades, with initial reports indicating a tentative agreement to trim spending by three percent.

Al Jazeera's Paul Brennan, reporting from Brussels, said not every member state got what it wanted from the summit.

"It doesn’t work like that in EU politics. What it comes down to now is convincing the public in each country that they got what they wanted... But we are waiting for the final document."

Francois Hollande, French president, sought broadly to paint the agreement as a win for Europe - calling it a grand compromise that safeguarded important shared programmes and values.

'Necessary flexibility'

He told reporters at a news conference that if European countries build up more credit than there are available resources, an "impasse" will be reached - and that to avoid such a scenario, the EU needs to have "necessary flexibility" - which, he said, would reach its "maximum level" under the new budget agreement.

Mariano Rajoy, Spanish prime minister, said all the hard work had "paid off ... apart from being good for Spain, it is a very good result for Europe as a whole".

David Cameron, British prime minister, backed by Angela Merkel, German chancellor, led a sustained push to prevent any increase in spending at a time of austerity for all, while France, along with Italy, fought to protect spending essential to boost growth and jobs at a time of record unemployment.

About 12 billion euros was cut from the last budget proposal, made at a summit in November, bringing the total reduction from the European Commission's original blueprint to 85 billion euros.

While vast as a headline figure, in annual terms the budget amounts to just one percent of total EU economic output.

The cuts agreed fell mainly on spending for cross-border transport, energy and telecoms projects, which were reduced by more than 11 billion euros. Pay and perks for EU officials - a top target for Britain - were lowered by around 1 billion euros.

Spending on agriculture, however, was spared further cuts, and there was an increase of about 1.5 billion euros on rural development over the seven years, satisfying France, Italy and Spain.

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Source:
Al Jazeera and agencies
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