By Gabriela Baczynska
BRUSSELS (Reuters) - European Union countries on Wednesday approved a 3 billion euro ($3.32 billion) fund for Turkey to improve living conditions for refugees there in exchange for Ankara ensuring fewer of them migrate on to Europe.
The EU is counting on the deal to lower the number of asylum seekers arriving in Europe after over a million streamed onto the continent in 2015, mainly by sea from Turkey, with figures indicating little sign of the flow ebbing so far this year.
All 28 EU countries signed off on the proposal at a meeting in Brussels after Italy dropped its opposition to the plan, which was first agreed with Ankara in November.
The bloc's executive European Commission welcomed the decision on Turkey, currently home to an estimated 2.5 million refugees from the civil war in Syria next door.
"Turkey now hosts one of the world's largest refugee communities and has committed to significantly reducing the numbers of migrants crossing into the EU," said Johannes Hahn, Commissioner for Neighbourhood Policy and Enlargement.
"The Facility for Refugees in Turkey will go straight to the refugees, providing them with education, health and food. The improvement of living conditions and the offering of a positive perspective will allow refugees to stay closer to their homes."
Prime Minister Mark Rutte of the Netherlands, the current holder of the EU's rotating presidency, said cooperation with Turkey on the migration crisis would also focus on targeting human traffickers who have arranged passage for many people.
Europe is saddled with its worst migration crisis since World War Two. This has put strain on security and social systems in some EU states and resolving the problem has become an urgent policy priority for governments since it has fueled support for anti-foreigner groups, nationalists and populists.
The crisis has bitterly divided EU members, as underlined by the fact that it took the 28 states more than two months to agree on the funding for the Turkey scheme even after their leaders approved setting it up back in November.
The EU would provide 1 billion euros from its own budget, twice as much as initially offered. The rest is to come from 28 governments, with Germany being the top contributor at 427.5 million euros in 2016.
Britain would follow with this year's contribution of 327.6 million euros, France at 309.2 million euros, Italy at 224.9 million and Spain at 152.8 million, according to figures provided by the European Commission.
The U.N. refugee agency UNHCR says more than 67,000 people arrived in Europe via the Mediterranean Sea so far this year, entering mainly through Greece, as well as Italy.
Struggling with its own weak economy and large debt loads, Italy unblocked the funding only after Brussels said it would exempt contributions to the Turkey fund in calculating EU countries' budget deficits. Under EU rules, countries must keep their budget shortfalls low or face disciplinary action.
Italy wanted to exempt more migration-related spending from its budget gap and sought to agree a figure of about 3.2 billion euros this year. The European Commission refused to endorse a lump-sum up front and said that any such spending would be analyzed separately after it takes place.
But on Wednesday, Rome secured an additional declaration before agreeing to the fund, in which it says it still "strongly expects" Brussels will exempt from its deficit figures "the full amount of costs" it incurred from 2011 when a conflict in its ex-colony Libya started and triggered higher migration to Italy.
That potentially opens way for more back and forth between Brussels and Rome as the latter seeks to win more financial breathing space from the Commission.
(Additional reporting by Francesco Guarascio, Editing by Tom Heneghan)