The European Union's parliament has finally approved the first spending cut in the history of the 28-nation group.

Over two years of haggling finally ended when the EU legislature approved the budget, which will fall to 960 billion euros ($1.3 trillion US budget) for the seven years between 2014 and 2020.

The cut had been sought by several EU countries which wanted to see austerity at the EU level at a time when many were pursuing cutbacks at home.

EU President Herman Van Rompuy called the spending commitments "a realistic budget for Europe" which has been struggling through years of financial crisis.

The budget fell some 40 billion euros short of the first proposals of the EU head office which had wanted more clout to push through investment and employment programs.