Brussels, 17 December 2005 (RFE/RL) -- The budget deal, announced just after 3 a.m. today, was a shot of good news for the EU.
European Commission President Jose Manuel Barroso was triumphant. "I welcome the fact that member states have now reached a deal," he said. "This is indeed a very important political signal for Europe, Europe avoided paralysis, Europe is on the move.
In the run-up to the grueling 36-hour talks, British officials had warned that a collapse of the talks in Brussels risked putting an eventual deal off by another year.
This would have been a serious blow for the EU. It would also have meant that the EU’s 10 new member states would have been eligible to receive only half the money the new budget will now release from 2007 onward.
British Prime Minister Toney Blair, who chaired the talks as the EU’s president in office, said a redistribution of EU funds to benefit the newcomers is the budget’s most important achievement.
"The key thing is that it allows the enlargement in the new member states to take place with them to be able to plan ahead with some certainty for the money they are going to receive. And I just want to emphasize that of course, the whole purpose of the financial perspective is to engage in a large switch of resources from the wealthy countries, the original European 15, to the new accession countries," Blair said.
The eventual compromise puts the 2007-13 budget at 1.045 percent of the EU gross national income. This amounts to 862 billion euros ($1.035 trillion) over the seven-year period.
The new member states will receive aid worth more than a 100 billion euros ($120 billion). Poland, the largest among the 2004 newcomers, will get nearly 60 billion euros.
German Chancellor Angela Merkel was credited as a key influence behind the scenes. She steered Britain and France to a compromise in their spat over the future of the EU’s farm spending. And in a move described as "beautiful and wonderful" by Poland’s prime minister, Merkel gave that country an extra 100 million euros from German funds to meet an ultimatum by Warsaw.
The new budget earmarks 50 billion euros for the EU to spend as a "global actor." Most of these funds will go to EU partner countries.
The budget deal is also good news for future enlargement. Macedonia was given candidate status after France lifted earlier objections to agreeing any further moves on enlargement without a budget. However, EU officials have indicated it may take years before Macedonia will actually begin membership talks.
Key to the deal itself was a compromise involving Britain and France. Britain was forced to give up 10.5 billion euros of a budget rebate over 2007-13.
The British rebate dates back to 1984 and is linked to EU’s agricultural and other aid spending levels to reflect the fact that at that time, Britain got relatively little back for its contribution. The rebate is now worth 5 billion euros a year and will continue to grow with EU spending.
Nearly all EU member states agree that as one of the richest EU countries now, Britain has little right to the rebate. However, London has a veto on any decision. For giving up the rebate London wants deep cuts in EU farm spending, worth over 40 percent of the budget and benefiting mostly France.
Blair said that as a compromise, Britain agreed not to claim any money back for aid going to the new member states. "The rebate remains in full on all spending other than the spending for economic development in the new European countries," he said. "In other words, other than that money that we are investing in economic development for the future, the rebate remains full."
In exchange, France has agreed to review EU spending starting in 2008. However, it was clear that no changes will be implemented before the next budget, which will be for the period from 2014 to 2020.
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A slideshow of images related to the top news stories of 2005 from throughout RFE/RL's broadcast region with links to RFE/RL's reporting.