European Council president Herman Van Rompuy said EU leaders have agreed a pact to strengthen the euro and he described the deal as “one of the most important decisions” taken in recent months.
Mr van Rompuy will now explore what treaty changes would be needed to enforce fiscal discipline and the executive European Commission will help prepare the changes, before reporting back in December.
A draft summit statement said the amendments would have to be limited and that an existing rule that EU countries cannot assume the debt of another member of the bloc must stay.
It commits the EU to creating a permanent mechanism to replace the €440-billion emergency safety net for indebted euro zone countries when it expires in mid-2013.
The permanent crisis mechanism will involve private investors, the International Monetary Fund and strong conditions on which funds would be lent to countries in need.
"The European Council will revert to this matter at its December meeting with a view to taking the final decision both on the outline of a crisis mechanism and on a limited treaty amendment so that any change can be ratified at the latest by mid-2013," the draft statement said.
In the face of pressure from German chancellor Angela Merkel, the leaders of the 27 member states resolved to give European Council president Herman Van Rompuy a mandate to examine the case for treaty change to strengthen the single currency system.
Luxembourg prime minister Jean-Claude Juncker said this afternoon that "sanctions have to become more automatic" for euro region nations that violate deficit and debt rules.
The agreement to work towards a "limited" treaty revision, less than 11 months after the enactment of the Lisbon pact, raises the prospect of the Government having to decide whether to call another EU referendum.
Speaking from Brussels today Taosieach Brian Cowen said it was too early to say if the proposed changes to the Lisbon treaty would require another referendum.
"When detailed proposals are brought forward we have to judge it against our own constitutional requirements."
"The important point is that we will now look at the discussions that will take place between now and December and, in terms of terms of treaty changes needed, once it doesn't involve a transfer of competencies from Ireland to the EU" a referendum may not be necessary.
"Ireland and its government and parliament are in discussions at the moment. We are going to do whatever is necessary to ensure we meet our commitments and our obligations under the stability and growth pact," Mr Cowen said.
Dr Merkel told reporters after the summit that: ""I think it is important to create a clear culture of stability in Europe. That is the ultimate for good cohesion in the EU.
"Europe makes us strong but this Europe needs rules. It must be successful and to that end we made an important start yesterday".
"One can already say that the euro will be strengthened, firstly through the strengthening of the Stability and Growth Pact (budget rules) and the possible resulting sanctions that will happen quasi-automatically," she said.
Senior EU sources said European Central Bank President Jean-Claude Trichet reiterated concerns at the summit that the budget rules were not tight enough and that drawn-out negotiations on the permanent mechanism could upset markets.
The sources quoted him as saying lengthy negotiations could be a "problem" when the economic crisis is still very deep and markets remain tense.
Reuters
