EU member states today provisionally agreed to a 2.02% increase in the EU’s 2012 budget, nearly halving the European Commission’s call for a 4.9% increase in spending next year.

The agreement, hammered out by diplomats at the Council of Ministers budgets committee, still needs the endorsement of permanent representatives and member state ministers. Their approval is expected in the coming weeks.

Once endorsed, the agreement will represent the Council’s formal negotiating position going into budget negotiations with the European Parliament.

The accord sets the stage for what many expect to be a tough battle between the Council of Ministers and the Parliament. MEPs on the Parliament’s budgets committee have said that a 4.9% increase is the “bare minimum” needed to fund EU policies and commitments.

The Council’s provisional position recommends an EU budget totalling €129 billion in payments for 2012, as compared to the Commission’s €132.7bn proposal.

The Council adopted its stance without the backing of the UK, the Netherlands, Finland, Sweden and Denmark, all of which voted against the compromise 2% proposal drafted by Poland, which today took over the EU’s rotating presidency of the Council of Ministers.

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The UK and the Netherlands had pushed for a spending freeze for 2012, but the five did not have enough votes to block the compromise.

Under EU rules, decisions on the budget are taken by qualified majority.

Both Germany and France decided to vote for the proposal, diplomats said. France had previously called for an increase to be lower than the EU’s rate of inflation, which stood at 3.2% in May.

The Council’s proposal recommends cuts across all spending lines, including to administration and to projects promoting jobs, regional aid and external relations.

Janusz Lewandowski, the European commissioner for financial programming and budget, has said that the largest increases in spending next year are for regional aid projects in poorer member states to which member states have already made commitments.

He said the EU was legally obliged to pay for those projects, many of which have already been implemented.

The Parliament and the Council will hold a first round of budget talks on 11 July, after which MEPs will draft their formal position ahead of negotiations in October.