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EU leaders appeared poised Friday to cut the bloc's budget for the first time in its six-decade history, with a tentative agreement to trim spending by three percent over the rest of the decade, diplomats said.
After a short break following a 19-hour session lasting through the night, the bloc's 27 leaders were due to return to the negotiating table at 1200 GMT.
At the marathon talks to produce a 2014-2020 budget, British Prime Minister David Cameron, apparently backed by German Chancellor Angela Merkel, led a sustained push for the EU to share in the austerity national governments are facing.
France, along with Italy, fought to protect spending it sees as essential to boost growth and jobs at a time of record unemployment, but indications early Friday were that Paris could live with the deal.
"It is not a fantastic compromise deal but it is acceptable," a French diplomatic source told AFP.
A draft deal sets the 2014-20 actual spending or "payments" at 908.4 billion euros ($1.2 trillion), with an absolute ceiling of 960 billion euros for spending "commitments" to the budget.
The latest figures would represent a 3.0 percent cut from the 2007-13 budget and were less than the 973 billion euros that Cameron and allies such as the Netherlands rejected at a budget summit in November that collapsed without any deal.
In the EU budget process, commitments refer to the maximum amount that can be allocated to programmes while actual spending or "payments" is usually lower as projects are delayed or dropped.
Originally, the European Commission had wanted a 5.0 percent increase in commitments to 1.04 trillion euros ($1.4 trillion) -- about one percent of the EU's total gross domestic product.
After a six-hour delay Thursday, leaders thrashed out the details overnight before breaking in the morning.
Amid the cuts, they also managed to find six billion euros for a new fund to tackle youth unemployment.
Jobless numbers across the EU are currently over 26 million, with nearly three out of five under the age of 25 out of work in Spain and Greece.
If the talks do finally deliver an accord, there is another important hurdle still to clear -- the European Parliament which must approve it and lawmakers have already made clear they are in no mood for more austerity.
Parliament head Martin Schulz said bluntly on Thursday that he and the assembly would not accept a budget which would compromise EU programmes and undercut its future.
The draft showed key budget areas -- the Common Agricultural Policy support payments to farmers and Cohesion Funds, a crucial source of money for new EU members seeking to catch up with their peers -- to be largely untouched compared with the November figures.
But plans to use 40 billion euros to leverage private investment in cross-border energy, transport and digital networks was slashed by a quarter and EU administrative expenditures were cut as well.
Some of the roughly 35,000 EU civil servants have already begun strike action over fears they will lose their jobs and the perks.
Cameron, who last month risked isolating himself with a decision to hold a referendum on Britain's membership of the EU, put his cards on the table right from the start on Thursday.
"When we were last here in November, the numbers that were put forward were much too high. They need to come down -- and if they don't come down, there won't be a deal," Cameron said.
French President Francois Hollande, meanwhile, said cuts in support for farmers and investment for growth would be his red lines but he may be able to argue that globally, he has managed to protect key areas of concern to Paris.
Diplomats pointed to a provision which might allow another 12 billion euros from EU fines and unspent funds to be written back into the payments line, thus bringing it back up to 920 billion euros and allowing more flexibility.