The EU finally announced it had found a compromise on the bloc's 2007 to 2013 budget in the early hours of Saturday morning. Britain said it would cut 10.5 billion euros ($12.57 billion) off its jealously-guarded budget rebate, with funds being shifted towards the poorer mainly former communist countries that joined the EU last year. France agreed to drop resistance to a spending review that could reduce its agricultural subsidies. The 25 member states also decided to boost budget by nearly 862.4 billion euros.

"The long wait was worth it," said Germany's Merkel. It was her first EU summit as chancellor and, many officials said she played a key mediating role. "I am convinced ... we have concluded a good agreement for Europe's future, a signal of hope for European development," she added.

"Merkel played an extraordinarily important role behind the scenes," said Austrian Chancellor Wolfgang Schüssel. "She has acted calm, sober and very professional."

Romanian President Traian Basescu said: "She brokered the deal from start to finish. She was the first to break the deadlock with a proposal."

Merkel has played a very constructive role," a European diplomat told Reuters. "The absence of (former German Chancellor Gerhard) Schröder and his unquestioning support of Chirac has meant the French president has to be more careful."

Germany compromises, too

But Merkel gave way too, announcing Germany would be prepared to do without 100 million euros which would instead come to the aid of Poland's poorest regions.

Polish Prime Minister Kazimierz Marcinkiewicz described Merkel's actions as the "a wonderful gesture of solidarity" as he celebrated the deal. "The taste of victory is as good as the finest French champagne," he pronounced. "Every fifth euro will be spent on Poland," he told journalists.

British Prime Minister Tony Blair, who was charged with brokering the deal in his role as EU president, also lauded the plans. "This is an agreement that allows Europe to move forward," he said. "If we believe in enlargement, we had to do this deal now. If we'd failed to reach an agreement at all, I think that Europe would have been in a very severe crisis."

His comments were echoed by French President Jacques Chirac, his perennial summit sparring partner, who also said the deal was "a good accord for Europe, which gives it the means necessary to fund its ambitions."

"Once again, the crisis has been resolved," Chirac added, saying the deal had met French requirements. "Europe is now marching forward again," he said.

Barroso wanted more

Accord on the budget plans had been blocked chiefly by Britain's refusal to give more ground on the EU rebate which then-prime minister Margaret Thatcher famously secured in 1984.

The other main sticking point was France's resistance to calls for a major reform of the EU's long-disputed farm subsidy system, of which it is the main beneficiary.

Another apparent mediator, Luxembourg Prime Minister Jean-Claude Juncker, said that unlike during his country's turn at the presidency, which failed in June to get an accord, "this time all delegations attending the meeting were ready to take a decision."

European Commission head Jose Manuel Barroso admitted that the deal, which represents 1.045 percent of EU-wide gross national income, was not as big as the budget initially sought by his EU executive team. But he too hailed the extra money for the new members. "Without solidarity there is no union," he said.