Luxembourg PM Jean-Claude Juncker (left) with UK Prime Minister David Cameron
at summit, 28 Oct 10 Mr Cameron (right) lobbied hard to put the EU budget issue
on the agenda
Tough rules for the eurozone, aimed at averting another financial crisis, have
been agreed at an EU leaders' summit.
The leaders agreed to a permanent fund to help the euro in times of crisis, and
to laws giving the EU the power to check national budgets.
EU officials said the eurozone had almost collapsed earlier this year because
it lacked such a mechanism.
Germany wants limited changes to the EU treaty to reinforce the changes, but is
facing resistance from other countries.
Meanwhile, UK Prime Minister David Cameron won backing for his battle against a
5.9% rise in the EU budget.
Germany and France were among 10 nations supporting Mr Cameron's attempt to
limit the budget increase to 2.9% - a rise that would still cost UK taxpayers
roughly 435m (500m euros).
The meeting will conclude later on Friday.
Treaty question
The BBC's Jonty Bloom, in Brussels, says the new eurozone rules are designed to
force a country to put its house in order long before its economic problems
threaten the eurozone.
EU CRISIS MECHANISM
deficit or debt limits
UK and Denmark not included)
Herman Van Rompuy, the President of the EU Council, hailed the summit's
achievements, saying: "Today we took important decisions to strengthen the
eurozone.
"We recommend a robust and credible permanent crisis-resolution mechanism to
safeguard the financial stability of the eurozone as a whole."
Under the new rules, EU officials will warn governments about property and
speculative bubbles, and will be able to impose stringent fines on countries
that borrow and spend too much.
The permanent crisis fund will replace a temporary one, worth 440bn euros,
created earlier this year to bail out Greece and support the euro.
But Germany has argued that the Lisbon Treaty will have to be amended to make
the emergency fund permanent and legally watertight.
The current treaty contains a clause banning members from bailing each other
out.
Start Quote
It would be very difficult if not impossible for Britain to change the EU
Council's position
End Quote Gavin Hewitt BBC Europe Editor
"Everybody agreed that there must be a permanent crisis mechanism, and
everybody agreed that this must be formed by the member states," said German
Chancellor Angela Merkel.
"Everybody therefore agreed that this will require a limited treaty change."
It took almost a decade of hard negotiations and two referendums in the
Republic of Ireland to ratify the Lisbon Treaty, and many states are reluctant
to make a move which could trigger a similar process.
The EU Constitution - the treaty's ill-fated forerunner - was rejected by
voters in France and the Netherlands.
Mr Van Rompuy has been tasked with finding out whether the fund can be set up
without each of the 27 member states having to ratify the treaty all over
again.
The UK says a mechanism to ensure stability in the eurozone is desirable - and
that the planned sanctions would not apply to the UK.
But all 27 member states' budgets will come under close scrutiny in a "peer
review" process.
There would be progressive sanctions on countries which overshot the maximum
debt level allowed under the EU's Stability and Growth Pact (SGP), which is 60%
of GDP.
Sanctions would kick in earlier than is the case under the current SGP,
enabling the EU to take preventive action, for example against a country with
an unsustainable housing bubble, or with mounting debt that undermines its
competitiveness.