Leaders sign £509bn budget deal that will see EU through to 2006

Determined to demonstrate what Germany's Chancellor, Mr Gerhard Schroder, called the "capacity of the EU to act", European leaders…

Determined to demonstrate what Germany's Chancellor, Mr Gerhard Schroder, called the "capacity of the EU to act", European leaders bit the bullet and signed a €645 billion (£509 billion) budget agreement that will see the Union through to the end of 2006.

Exhausted leaders also agreed to convene a special summit on April 14th, probably in Brussels, to give formal approval to their nomination of the former Italian prime minister as the next Commission president.

The Agenda 2000 deal, agreed finally at 6 a.m. after a night of exhausting and sometimes fractious talks, will mean some £2.97 billion in structural and cohesion funds for Ireland and farm transfers to the State worth £10 billion.

The package, which represents a cut of some 56 per cent in Ireland's annual average structural and cohesion fund receipts, will mark a critical transition in its relationship with the EU from net recipient to joining the ranks of the wealthy net contributors to the Union as soon as 2007.

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The Taoseach, Mr Ahern, grey with tiredness, told a dawn press conference he was well satisfied. "It was tough right to the end. There was no doubt about that." Although the overall structural figure was below Mr Ahern's stated objective of some £3.2 billion, experienced EU observers acknowledged the package was as good a deal as Ireland could have expected given the cards it was playing. Mr Schroder said: "What we have achieved is not ideal but it's a good compromise."

Although the budget was greeted by many as evidence of the determination of the EU to stabilise spending at 1999 levels, there was also anger at what was seen as the successful hijacking of farm reform by French President Jacques Chirac. While Irish farmers will be delighted to see the back of suggested direct aid cuts and the postponement of milk reform for a year, the British government was not alone in expecting domestic flak over the concessions to France.

The mood inside the meeting was reportedly tense, with Mr Schroder having to resort more than once to bilateral meetings with leaders to defuse rows. Britain, however, left satisfied, with its budget rebate largely intact. Both Portugal and Spain, like Ireland cohesion countries, were able to boast significant last-minute concessions. The Spanish Prime Minister, Mr Jose-Maria Aznar, said he was "reasonably satisfied" because aid to Spain would rise by 5.6 per cent.

Crucially, the budget deal sets in place the financial means to ensure that enlargement can begin in 2002, although probably it will not do so until 2005. A budget of some £36 billion was ring-fenced for the new members. The German Deputy Foreign Minister, Mr Gunter Verheugen, emerging bleary-eyed from the talks, insisted that enlargement was on track and would be helped by the accord.