LEAD: EU agrees to 2012 budget

Nov 19, 2011, 7:47 GMT

Brussels - Negotiators from European Union member countries and the European Parliament reached agreement early Saturday on a 2012 budget, participants in the overnight talks said.

The draft would raise EU spending by 2.02 per cent to 129 billion euros (174.5 billion dollars), the sources said.

The move could set up a clash between member governments and the European Parliament, whose members are seeking a larger budget, with 5.2-per-cent growth over 2011 levels to 133.1 billion euros. The two sides have two weeks to negotiate an agreement.

'I'm really very relieved that we've reached an agreement,' said Polish financial state secretary Jacek Dominik after the 17-hour round of negotiations.

'This is an austerity budget,' said Janusz Lewandowski, the EU's budget commissioner, who had been pushing for a 132.7-billion-euro budget. 'This agreement is better than prolonging the dispute.'

The coming negotiations between the parliament and the member nations will be set against the backdrop of increasing austerity in Europe. With more countries seeking to slash their budgets, there are likely to be calls for less money to be sent to Brussels.

'With all the austerity measures among the member countries, we have to count every euro carefully,' said Dominik. He said that means savings have to be found in many EU institutions.

Furthermore, since every euro promised is not necessarily delivered, the EU will also be forced to slash spending projections for many of its agencies.

But Lewandowski reminded member nations that they have obligations to the EU.

'Even during times of austerity, bill have to be paid in a timely fashion. The budget must not become a hostage to the financial problems of the member nations.'

Two-thirds of the EU budget comes from member nations' payments. The rest is financed by taxes and customs.