BRUSSELS, Dec 17: European Union leaders agreed a long-term budget that put the troubled 25-nation bloc back on track on Saturday after Britain gave up part of its cherished EU rebate to help boost aid to poor new, east European members.

The late night deal after two days of haggling averted the threat of financial paralysis and restored some confidence after a year of setbacks marked by the rejection of the EU’s first constitution by French and Dutch voters.

The breakthrough came when Britain agreed to cut its rebate by 10.5 billion euros ($12.57 billion) over seven years and raised the 2007-2013 budget to 862.3 billion euros, or 1.045 percent of EU output from 1.03 percent in an earlier proposal.

“This is about getting an agreement that allows Europe to move forward,” British Prime Minister Tony Blair said at a news conference, stressing the deal would launch a massive shift of resources to the ex-communist newcomers.

He insisted that an agreement on a comprehensive review of all EU spending and revenue in 2008/9 created an opportunity to modernise the budget and overhaul farm subsidies which swallow 43 per cent of the bloc’s spending.

European Commission President Jose Manuel Barroso, who had sought a far bigger budget, said the EU had salvaged its public credibility with this accord. “What would be the signal to public opinion if we can’t agree on a budget?” he asked.

Failure would have prevented the 10 new members from using the hefty funds available to modernise their economies and bring them into line with their wealthier western cousins.

French President Jacques Chirac hailed the compromise as “a good deal for Europe” and praised Mr Blair’s political courage.

But the British leader was forced to defend himself against Eurosceptical British journalists who accused him of sacrificing billions in taxpayers’ money without any guarantee that France would accept changes to farm subsidies before 2014.—Reuters