EU agrees larger 2017 budget after marathon talks, Italy abstains

By Francesco Guarascio

BRUSSELS (Reuters) - The European Union reached agreement in the early hours of Thursday on next year's budget, which will increase government spending to create more jobs and address the migration crisis, but Italy abstained, a new sign of Rome's tense relations with Brussels.

The EU states agreed to raise their spending for the 2017 EU budget to 134.4 billion euros ($144.09 billion) from an initial offer of 133.7 billions. Lawmakers and the European Commission, the EU executive arm, had requested more.

The Council of EU states also agreed to raise to 157.8 billion euros next year's commitments to payments that may be incurred later, from an initial pledge of 156.3 billions.

Compared with this year, spending will increase mostly to resettle refugees within Europe and to enhance border control, as the continent grapples with an influx of migrants and asylum seekers from Africa, Asia and the Middle East.

More will also be spent to create jobs in countries hit by high unemployment, particularly among the young.

"We have reached our aims," said Jens Geier, a German centre-left lawmaker who took part to the negotiations. "The 2017 budget clearly focuses on our priorities of boosting growth, creating jobs - especially for youngsters - and tackling the migration crisis."

Less money will be spent next year on the bloc's least developed regions, which are mostly in the East. But thatspending is expected to pick up in following years.

However, in an unprecedented move, Italy abstained from the vote, even though the higher spending on migration and youth unemployment is meant to address Rome's woes. The country is on the front lines of the migration crisis and has one of the bloc's highest unemployment rates.

On Dec. 4, Italy will hold a referendum on constitutional reforms that has turned into a confidence vote on Prime Minister Matteo Renzi.

As anti-establishment and anti-EU parties gain support in polls, Renzi has prepared an expansionary budget for next year that may breach EU fiscal rules, even if they have been relaxed in recent years mostly to accommodate Italy's spending needs.

In what appears as a tit-for-tat, Italy has also threatened to veto a review of the EU's 2014-2020 long-term budget, after the Commission warned Rome and five other countries over their possible breach of EU budget rules.

($1 = 0.9327 euros)

(Reporting by Francesco Guarascio, editing by Larry King)