The UK finally agreed to surrender EUR10.5bn of its budget rebate over the seven years, up from an original EUR8bn, in return from a concession by France that the Common Agricultural Policy will be part of a spending review in 2008-2009. Previously France had insisted that the CAP was untouchable until 2013.

The overall budget grows to 1.045% percent of EU output, well below the 1.24% demanded by the European Commission, but up from the UK's original 1.03% proposal. After a carping performance during the Summit which can only have weakened his already poor position, Commission chief Jose Manuel Barroso nonetheless welcomed the 'solidarity' of the agreement.

Prime Minister Kazimierz Marcinkiewicz of Poland, which will receive EUR4bn in regional aid, said it was a "budget of solidarity... good for the sake of Poland and for the sake of the development of Europe". His acceptance of the deal came after a last-minute donation of EUR100m from Germany's Angela Merkel, who is seen to have had a good summit, playing a major role in reaching agreement. "Merkel at the last minute gave 100 million euros extra for Poland which was the most beautiful and wonderful gesture of solidarity," Marcinkiewicz told a news conference.

In the spirit of euphoria which greeted the hard-fought agreement, even French President Jacques Chirac found words of congratulation for Britain's Tony Blair, who he said had made a "legitimate but politically difficult" gesture.

Back in the cold light of London's dawn, Conservative foreign affairs spokesman William Hague said, predictably: "Seldom in the course of European negotiations has so much been surrendered for so little. It is amazing how the Government have moved miles while the French have barely yielded a centimetre."