European Union leaders have agreed to open membership talks with Serbia, in recognition of its efforts to improve relations with breakaway Kosovo.

The Friday move is seen as a step toward embracing once-troubled countries in the Balkans.

Presidents and prime ministers from the 27 EU nations also welcomed that Croatia becomes the bloc's 28th member on Monday.

Earlier Friday, they overcame British-French divisions and agreed on seven-year, 960 billion euro ($1.3 trillion) budget. After a few hours of sleep, they returned in the morning to wrap up their two-day summit in Brussels.