BRUSSELS, Belgium (AFP) – British Prime Minister Tony Blair was praised abroad and vilified at home yesterday for clinching an EU budget deal, while German Chancellor Angela Merkel was applauded as a key mediator.

Acting as EU president until the end of the month, Blair sealed agreement overnight on a tighter 2007-2013 spending package with a mechanism to review and perhaps modernise it during the seven-year term.

But it was his decision, under heavy domestic fire, to give up more of Britain’s beloved multi-billion euro annual rebate which drew most comment.

“The British presidency deserves praise for its constructive role in a complicated negotiation and for the courage it showed in giving up part of its rebate,” Greek Prime Minister Costas Caramanlis said.

European Commission head Jose Manuel Barroso was disappointed that the deal, which represents 1.045 per cent of gross national income, was not as big as his EU executive team had sought, but hailed Blair nonetheless.

“I was not always agreeing with my good friend Prime Minister Blair… but honestly this was a very successful presidency,” he told reporters.

French Foreign Minister Philippe Douste-Blazy said Blair had shown strength.

“He is a British prime minister who preferred an internal battle on an idea of the EU, rather than to quietly do his job as a simple British prime minister,” Douste-Blazy said.

“He has been intelligent, courageous. He challenged a clear advantage amid a difficult domestic political climate.”

The budget freed up important funds for the new member states, many of them former communist countries, and indeed part of the rebate Blair gave up will be headed east from 2007.

“The budget proposals from EU presidency country Britain improved for Estonia with each round in the run-up to the solution,” Estonian Prime Minister Andrus Ansip said.

“We can leave the EU summit with the knowledge that we have enough money to lift the economic and social life even more rapidly to the level of older EU member states,” he said.

Slovak Prime Minister Mikulas Dzurinda agreed: “The result is better than we had hoped.”

Lithuanian Prime Minister Algirdas Brazauskas said Vilnius was “happy”, adding that it would receive euro440 million more a year than at present for a total of euro8.7 billion over the life of the budget.

Austrian Finance Minister Karl-Heinz Grasser said he was “very pleased” with an “exceptional” deal, which maintained Vienna, London’s successor as EU president from January 1, “in the right middle ground” with its net contribution increasing only moderately.

But in Britain, the press flayed Blair over his “surrender”.

“Blair’s the seven billion pound loser,” declared the mass-circulation Sun, as it savaged “the feeble premier” for compromising on the rebate won by then Conservative prime minister Margaret Thatcher in 1984.

The right-wing Daily Mail struck a similar note, talking of “Blair’s surrender” and “spectacular U-turn” arguing that “in return for the gigantic cash handover, he was set to get virtually nothing”.

The conservative Daily Telegraph said he “had performed his biggest climbdown over Europe” by giving up part of the rebate “without winning any commitment from France on early reform of farm subsidies”.

Most praise however was reserved for Angela Merkel, Germany’s first woman chancellor taking part in her first summit, for her behind-the-scenes diplomacy, shuttling between her partners.

Merkel played an “important role”, Sweden’s Svenska Dagbladet daily said in its online edition. “She agreed to a higher budget level, and therefore to paying more, so Blair could gather his ‘Christmas presents’ for those who were dissatisfied.”

France’s Le Figaro went further. “It appeared as if without her Europe would have found itself in a new political crisis.”

Major Spanish daily El Pais said she had played a key role.

“Merkel played an essential part in reducing the gap separating Blair and a Chirac who seemed inflexible,” it wrote.

French President Jacques Chirac, who appeared to have come away with the EU’s farm aid system he so staunchly defended virtually intact, was largely criticised. Czech daily Lidove Noviny said France, once “Europe’s motor”, had become its “nightmare”.