Next year's event will take place at Customs House Square
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Belfast City Council has agreed for the first time to fund the St Patrick's Day celebrations in the city.
The council said it was aiming to address the controversy that has surrounded the event for many years.
It was determined to provide an inclusive event in 2006 which could be enjoyed by everyone in the city, whatever their background, it said.
The decision was made at July's monthly meeting of Belfast City Council. The new funding will be £70,000.
In February, councillors voted not to grant £30,000 to help fund this year's St Patrick's Day parade.
Councillors decided not to overturn an earlier decision to refuse grant aid to the parade organisers.
In a statement issued on Tuesday, the council said the outdoor event - organised previously by the St. Patrick's Carnival Committee - had proved contentious.
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We look forward to working with not only the Carnival Committee but all of the people of Belfast over the months ahead to deliver an event which all can enjoy, not only in 2006 but in future years
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However, the council said it had a series of discussions with the Carnival Committee and hoped with substantial council involvement the event would be as inclusive as possible.
The Saint Patrick's Carnival committee has welcomed the news. Organiser Conor Maskey said it was important that the day was celebrated in Belfast.
Councillor Alex Maskey, chairman of the policy and resources committee, said: "This is a major step forward.
"For too many years, the council has felt unable to support the organisation of a major St Patrick's Day event in the city centre.
"Now we look forward to working with not only the Carnival Committee but all of the people of Belfast over the months ahead to deliver an event which all can enjoy, not only in 2006 but in future years."
Pilot event
However, DUP councillor Nelson McCausland said his party would be seeking assurances that there would not be Irish tricolours flying at the event.
"What the city council is hoping to have next year would be an event free from that plethora of tricolours we saw outside the City Hall this year," he said.
"There is still quite a way to go and a lot of assurances will have to be obtained and arrangements made to ensure that we have an inclusive event rather than an Irish nationalist event."
The council agreed the event should be held in Custom House Square and be run as a pilot and will "be evaluated independently".