EU budget: Cameron hails agreement as 'good deal for UK and Europe'

David Cameron has hailed a deal which will see the first ever real-terms cut in the European Union's budget as "good for the UK and good for Europe".

After two days of talks, leaders agreed on a 908bn euros (£768bn) budget limit for 2014 to 2020 - about 3% lower than the current seven-year period.

The prime minister said the public could be "proud" of the deal.

Labour welcomed the news but critics warned the European Parliament could still block the package.

Friday's agreement - which required the backing of all 27 members - represents the first reduction in the EU's multi-annual budget in its history and comes after EU leaders failed to agree a deal in November amid deep divisions over proposed austerity measures.

The UK Independence Party, which wants to leave the EU, said the deal had not addressed the fundamental issue of why the UK should remain in the union

"Clearly a huge victory for David Cameron: looks like he's managed to increase the UK contributions," its leader Nigel Farage said in a Twitter message.

And Martin Schulz, the president of the European Parliament, indicated that MEPs could seek to block the deal while former Belgian prime minister Guy Verhofstadt said the cuts were "unthinkable" while much of Europe was in recession.