EU Leaders Agree Historic Budget Deal

European Union leaders have made history by agreeing the first ever cut in the organisation's budget.

The breakthrough was declared in a tweet from the president of the European Council, Herman Van Rompuy, saying: "Deal done! #euco has agreed on #MFF (Multi-annual Financial Framework) for the rest of the decade. Worth waiting for."

The deal, the first decrease in the bloc's 56-year history, aims at placating millions of European citizens struggling with austerity measures and recession.

Reports said the agreement fixes a spending limit of 960bn euros (£820bn) for projects the EU can promise to fund between 2014 and 2020.

That is far less than the 1.03tn euros (£871bn) that the EU Commission originally proposed, reflecting Europe's tough economic times.

But not all those projects will be completed, as some are cancelled or postponed, meaning the maximum amount the EU will ever pay out is 908.4bn euros (£774bn) - a significant decrease on the actual spending cap.

"I think the British public can be proud that we have cut the seven-year credit card limit for the European Union for the first time ever," Prime Minister David Cameron told an end-of-summit press conference.

He said, however, the UK's net contributions would rise - but by less than had been feared. He said the budget would be "more modern and effective" and called it a "good deal" for Britain.

"(It) shows that working with allies it is possible to take real steps towards reform in the European Union," Mr Cameron said.

However, the EU Parliament must still approve the deal - and some legislators have suggested that the cuts are unacceptable. Securing any parliamentary approval is likely to take months.

Sky's Europe Correspondent Robert Nisbet said Mr Cameron appears to have made good on his promise to achieve at least real-terms freeze.

Mr Cameron, supported by other northern European leaders, argued that the EU could not increase spending at a time of austerity, but differences remained on where to make cuts.

The deal was reached after two days of intense talks in Brussels. French President Francois Hollande called it a "good compromise".

The reductions agreed on Friday fall mainly on spending for cross-border transport, energy and telecommunications projects.

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