European Union president Ireland has proposed a compromise on how to enforce EU budget rules under which member states should achieve a surplus when their economies are booming.
The compromise was designed to end a stand off between the Dutch and Germans on an issue that is a sticking point for a new constitution.
Amendments to the new treaty EU leaders are discussing at a summit called for the surpluses achieved by member states in economic upswings to balance deficits in downturns. However, they would make it harder for the European Commission to enforce budget discipline.
The budget surplus change in a declaration to be attached to the first EU constitution was a concession to the Dutch, who have demanded tougher enforcement of the EU's much flouted budget rules, against opposition from deficit sinner Germany.
"The objective is to have a budgetary surplus in good times which creates the necessary room to accommodate economic downturns and thus contribute to the long-term sustainability of public finances," the draft said.
Ireland also proposed that the executive European Commission would determine when a country has breached the EU deficit ceiling, but that member states would decide what steps to recommend to that government to cut its shortfall.
As a concession to Germany, the draft proposed tougher conditions for economic policy decisions in the 25-member EU. According to the draft, the Commission would need the backing of 65 per cent of member states and 72 per cent of the EU population on budget recommendations, a condition to be applied also for decisions on justice, home affairs and foreign issues.
This threshold is considerably higher than the suggested 55 per cent of member states and 65 per cent of the population for less politically sensitive issues.
Germany said it accepted the latest compromise proposals put forward by Ireland, but noted that leaders had not yet discussed the issue of how budget deficits should be policed.
The Dutch welcomed the new draft. "We're talking about it. It moves in the right direction but perhaps we can beef it up some more," an official said.
The row over the enforcement of the EU's Stability and Growth Pact was ignited by a recent letter by Germany, Italy, Greece and Poland calling for a weakening of the Commission powers over member countries' budgets.
Diplomats said the new wordings seemed to appease both the Dutch and the Germans. France, which did not sign the letter but sided with Berlin, could also accept the formula.