EU leaders last night yielded to German and British demands to strengthen the agreed text of an amendment to the Lisbon Treaty creating a permanent euro zone bailout fund.

As their seventh summit of the year in Brussels was again dominated by the sovereign debt crisis, the leaders agreed explicitly to reserve the fund for "last resort" interventions to prop up weakened members of the single currency.

Also on the table is the text of a draft declaration by euro zone leaders in which they would declare themselves ready to "ensure the availability of adequate financial support" through the existing fund if required.

While it was unclear late last night whether leaders would be prepared to endorse such a declaration, they have been under pressure from the European Central Bank (ECB) and the IMF to increase the fund.

The stance of German chancellor Angela Merkel will be crucial, as she has strongly resisted enlarging the European Financial Stability Facility (EFSF).

An early draft of the proposed declaration said the leaders affirmed their readiness "to do whatever is required" to ensure euro zone stability.

They were due to discuss the financial crisis over dinner last night with European Central Bank chief Jean-Claude Trichet, who has been pressing leaders to intensify their effort to tackle sustained disruption in sovereign debt markets.

The text of the proposed treaty amendment was changed at the last minute after leaders bowed to Dr Merkel's demand to rework the text.

European Council president Herman Van Rompuy declared the deal was done around 7.40pm in a posting on Twitter. "We have an agreement on treaty amendment," he wrote.

While Dr Merkel pushed to include the Latin expression for last resort – ultima ratio – in the treaty revision, that was ruled out as Latin is not a language of the union and because such a reference was deemed vulnerable to legal challenge.

Diplomatic sources said the leaders agreed to change each of the sentences already agreed by European governments in advance of the summit.

"The member states whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro as a whole," said the text agreed last night. This marked a change from the earlier version which did not include the words "to be activated if indispensable".

The second sentence they agreed said "the granting of any required financial assistance under the mechanism will be made subject to strict conditionality".

This reflected the addition of the word "any" into the original proposal.

Late haggling over the text of the proposed amendment came as Taoiseach Brian Cowen signalled the Government's belief that the revision will not necessitate a referendum in Ireland.

The leaders want to execute the change by deploying a revision procedure reserved for manoeuvres which do not increase the competences of the EU.

They can do this because the permanent fund will operate as an inter-governmental facility, outside the ambit of the EU institutions.

In addition, EU leaders agreed to say in the formal "recital" of their decision to revise the Lisbon pact that the treaty article under which the European Commission is providing aid to Ireland cannot be used for when creating the permanent fund. This followed pressure from British prime minister David Cameron, who wanted to ensure there was no further draw from the EU budget for bailouts for euro zone members.

Mr Cameron had yet to take office last May when the outgoing Labour government agreed to include a €60 billion credit line controlled by the commission in the temporary rescue scheme.