EU leaders urge MEPs to back skeletal budget

Van Rompuy admitted that this is the first time an EU budget is smaller than the previous period, marking a decrease of 3.5 percent compared to 2007-2013.

"It is a budget of moderation, we simply could not ignore the extreme economic difficulties and consolidation efforts in member states. This had to be a leaner budget," he noted.

The deal marks a defeat for southern and eastern countries hoping for more subsidies, as well as for the European Commission, whose initial proposal went beyond €1 trillion, a red line for net donors like Germany, Britain, Finland and the Netherlands.

"The European Commission would have preferred a deal closer to its original proposal. But politically the deal we have now was the highest possible level of agreement that could have been reached at unanimity," EU commission chief Jose Manuel Barroso said alongside Van Rompuy.

French President Francois Hollande, who earlier this week warned against an austerity budget that would prove too weak to spur recovery, had to concede on his way out: "This was the best deal on offer given the context."

For a long time on Thursday evening, Hollande's position seemed irreconcilable with that of British Prime Minister David Cameron, who was demanding even deeper cuts. "It was a gap between, well, Britain and the continent," one eastern leader told journalists on the margins of the talks.

Germany also stepped up pressure in keeping the overall budget below €1 trillion by suggesting that having no deal may not be that awful after all.

The breakthrough came in the early hours of Friday when a compromise was reached by lowering the ceiling for the real payments to €908 billion, while keeping the ceiling for so-called "commitments" - the budget ceiling - to €960 billion.

"Everybody was talking about commitments, only the Brits cared about payments. It's like driving on the left side of the road," one EU official quipped.

Cameron presented the deal as a victory for Britain, saying the EU should not be "immune to spending cuts."

The gap between payments and commitments is allowed to a certain extent, as not all available money is used up by member states. Van Rompuy said the gap does not exceed 5 percent, which was also the case in the current seven-year budget.

For its part, the European Parliament has warned that the bigger the gap, the more likely it is for some projects to face a cash shortfall. Under the current rules, every unspent euro flows back to member states at the end of the year.

The parliament wants more "flexibility" in keeping part of this unspent money for several years, in order to avoid situations, such as last year when the EU students exchange programme Erasmus almost went bust because there was no money for it.

A joint statement from the main political groups in parliament on Friday said they "cannot accept" the budget deal in its current form.

MEPs can only approve or dismiss the budget but cannot introduce changes. Van Rompuy, Barroso and Cameron urged MEPs to "live up to their responsibility" and approve the deal.

German Chancellor Angela Merkel downplayed concerns: "I have already talked to many of them, there will be no surprises."

An EU official told this website that much of parliament's reaction is "posturing," as the budget deal already takes their concerns on board: flexibility on the use of unspent money, a provision for the budget to be revised in two years and the possibility to use revenues from a future financial transactions tax.

Once approved by MEPs, the EU leaders' deal - which only sets out the figures and the broad budget priorities - will have to be translated into about 70 separate legal texts, which again will need to be negotiated by ministers and the EU parliament.

"We are working very closely with the commission and we hope that in a couple of weeks, the documents will be available in a form that can then be negotiated in the council," an Irish EU presidency source said.

A vote is expected in April or May, provided the parliament agrees and there are no other hiccups. Time is pressing, as the new budgetary framework has to be in place by 1 January 2014 and for funding projects to start to be drafted in member states.