EU governments have settled on a reform of rules that guarantee the stability of the euro to satisfy German and French demands that euro zone nations be given more room to spend their way out of economic problems.
Luxembourg Premier Jean-Claude Juncker, whose country holds the EU presidency, said national budget deficits will still not be allowed to exceed 3 per cent of gross domestic product.
But governments will be able to invoke many reasons to escape an immediate sanction.
"I am extremely pleased we have an agreement," Mr Juncker said yesterday after all-day talks. He said he expected the EU leaders - who open a two-day summit in Brussels tomorrow - to endorse the accord.
He said the 3 per cent debt rule - along with the requirement that a country's debt cannot exceed 60 per cent of GDP - remains a key euro stability target.
But the reform enables the European Commission to apply the euro rules in a more practical, "economic way," said Mr Juncker.
He said there will be a greater emphasis on growth when evaluating a country's spending.