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European Commission President Jose Manuel Barroso on Thursday announced a political deal on the EU's hotly contested 2014-2020 trillion-euro budget, hours before an EU summit mulls how to get millions of jobless youths back into the workplace.
Barroso said a deal on the 960-billion-euro ($1.25 trillion) budget was reached at emergency breakfast talks he called between the Commission, which is the EU executive, the European Parliament leadership, and Ireland, which currently holds the rotating EU presidency.
The high-level compromise, which follows months of bitter dispute between European Union institutions and European capitals over the budget, must still be formally approved by parliament's 754 lawmakers.
At a summit in February, hardline Britain, backed by Germany and the Netherlands, shot down a Commission bid to increase the budget by 5.0 percent as unacceptable in times of austerity.
Instead, EU leaders for the first time ever agreed to cut spending -- by 3.0 percent -- but this in turn sparked an uproar in Parliament where MEPs said funds were needed to bring back growth and jobs to struggling Europe.
European Parliament president Martin Schulz, who will be meeting leaders of the parliament's groups later Thursday, said it was "not an easy compromise" and that he would have to battle to win support from a majority of MEPs to now back a cut in the budget.
However if MEPs who meet next week in plenary session approve the budget as is, the EU will be able to next year use 3.6 billion euros of a six-billion fund set aside to help jobless youngsters.
Barroso had called the breakfast talks in hopes of unlocking the EU's next seven-year budget as the bloc's 27 heads of state and government gather for a two-day summit where youth unemployment tops the agenda.
"Today we have agreed on this budget that will make investment in Europe possible," Barroso said. "This is the growth fund for Europe."
Leaders meeting from 1430 GMT are to agree quick spending on jobs and training for the 5.6 million under 25-year-olds currently unemployed across the EU, victims of the years of tough austerity policies enforced to beat Europe's debt crisis.
Welcoming the morning breakthrough, Prime Minister Enda Kenny said: "What we have to do now is see that these monies are channelled into effective programmes so people across the EU can find jobs."
Kenny too will need to get agreement from all 27 EU nations.
Parliament recently refused a compromise deal. It demanded greater flexibility in the budget, for example allowing funds not used in one area to be transferred to another sector.
MEPs also want a mid-term review in the hope that if the economy picks up, the spending constraints might be eased.
Barroso said Thursday's political deal included "more flexibility" on payments and commitments, expenditure on youth employment, research, the Erasmus student programme, help for small businesses and increased aid for Europe's most deprived.