EU Reaches Deal on 7-Year Budget, Cuts Spending for First Time

European Union governments and lawmakers reached agreement on the bloc’s seven-year budget, as the economic crisis forced the first spending cuts in EU history.

Leaders of the European Parliament accepted a 960 billion-euro ($1.3 trillion) subsidies package for 2014-2020 as long as the governments allow some spending to be shifted between annual budgets. The sum will drop from 994 billion euros in the current budget cycle.

“This is not an easy compromise,” the parliament’s president, Martin Schulz, told reporters in Brussels today. “I must fight in the European Parliament for a majority, that’s for sure.” He announced a vote next week.

EU officials touted the budget pact, along with accords on a farm-policy revamp yesterday and on bank-failure rules early today, as evidence that the European decision-making machinery is delivering in the face of a recession and record unemployment.

Spending -- mainly for agriculture, infrastructure and aid for poorer regions -- stayed at the level EU government leaders agreed to supply in February. The parliament built in a review clause and more flexibility to shift funds around.

“This is a good deal for all Europeans,” European Commission President Jose Barroso told the press conference. “This is indeed the growth fund for Europe.”

Government leaders are likely to endorse the deal at a summit starting later today, Irish Deputy Prime Minister Eamon Gilmore said. As holder of the EU presidency, Ireland was in charge of negotiations with the parliament.

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