Brussels  - Following tough negotiations, European Union governments and the European Parliament agreed Wednesday night on the 16-member bloc's budget for 2010.

A decision was reached to increase expenditure by 6 per cent to 122.9 billion euros, EU diplomats said Wednesday night in Brussels. The budget must still be approved by parliament in December.

"The budget is a powerful response to the economic crisis," said Hans Lindblad, Sweden's state secretary for finance, after the nearly 12-hour-long discussions.

Earlier this month, the bloc's executive said that the EU economy was heading for a gradual recovery, with its gross domestic product (GDP) set to increase by 0.7 per cent next year and by 1.6 per cent in 2011.

The European Commission's more recent estimates marginally lower the projection for 2011 growth, to 1.5 per cent.

The rebound, spurred by a massive injection of government money, improvements on the financial markets and an increase in world trade, is set to follow one of the bloc's worst recessions in decades. (dpa)