The European Union agreed in principle today to back calls by Germany and France for limited changes to the union's main treaty to shore up Europe's defences against any new financial crises, EU diplomats said.
At a summit, EU leaders also endorsed a new set of tougher budget rules that had already been agreed by the bloc's finance ministers, including sanctions on states that fail to keep deficits and debt in check, the envoys said.
Final approval of the whole package depends on Germany accepting the wording of a statement giving a mandate to EU president Herman Van Rompuy to prepare the changes to the Lisbon treaty, with the support of the European Commission.
"There is a general agreement around the table that there will be a possibility of a limited treaty change, notably putting the euro area crisis mechanism on a more firm footing," one EU diplomat said.
France and Germany initially faced hostility to their demands to amend the treaty to create a permanent system for handling debt crises, enhance financial stability and support the euro.
Most leaders opposed big changes to a charter that took eight years to negotiate and became law only 10 months ago because it could involve referendums in some countries, but they agreed on the need for small amendments.
The leaders are aware that any sign that they are scaling back efforts to tighten budget discipline could unsettle financial markets worried by debt problems in euro zone countries such as Portugal, Ireland and Greece.
German chancellor Angela Merkel told reporters as she arrived at the EU headquarters for the summit that the euro and the European Union itself could be in danger.
"We need a mechanism that also includes banks and funds that earn high interest and that it is not just the taxpayer who has sole responsibility," she said, reiterating how she believes the permanent system should work.
She repeated calls for euro zone countries to have their voting rights suspended at meetings if they fail to keep their budgets in check. But most other countries said this was unacceptable and the demand was expected to be blocked.
Germany wants limited treaty alterations to ensure there is a permanent and legally sound crisis-resolution system in place for countries that use the euro. It had threatened to block the budget reforms if no deal was reached.
Germany, Europe's biggest economy, says a permanent system must replace the safety net created in May for all euro zone states after Greece's debt crisis threatened the euro. It has opposed extending the mandate of the ad-hoc €440 billion European Financial Stability Facility.
Any change to an EU treaty must be approved unanimously and ratified by all member states, either in a vote of parliament or via a referendum. The European Parliament should also agree.
In a sign that momentum towards treaty change was growing, countries such as Finland, Greece, Sweden and Britain, along with Poland, Slovakia and Ireland, signalled before the summit they would support limited amendments, although Warsaw linked its support to a deal on pension reforms.
European Commission president José Manuel Barroso said treaty change could be discussed if it was needed to improve the EU's ability to respond to economic and financial crises.
"Van Rompuy will receive a mandate to talk to the 27 member states on the opportunity for a treaty reform. And the Commission will receive a mandate to explore the technical modalities of such a reform," a senior EU source said.
Reuters