There will be no changes to the Lisbon Treaty after the failure of all 27 members states to agree on terms, meaning the 17 eurozone countries will have to come to a side deal.
The amendments to the EU treaty would have meant closer fiscal integration aimed at saving the euro, but now the eurozone countries, plus possibly another six EU members, will have to go it alone.
The UK and Hungary remain opposed to signing a new treaty or making changes to current ones.
European Commission President Jose Manuel Barroso was hopeful a deal between the 23 countries could be effective: “We believe that if it properly drafted, that will increase what our goal was, increase the governance, increase the credibility, increase the rules we have today for the euro area. I have to be very open and honest with you as always, we would have preferred, of course, a unanimous agreement,” he said.
The European Central Bank cut interest rates a quarter of a point to one per cent and relaxed lending terms to European banks to head off another credit crunch.
The side deal involving the 17 eurozone countries is a step in the right direction, according to the head of the bank, Mario Draghi: “It’s a very good outcome for the euro area, very good. It’s quite close to a good fiscal compact, and it’s certainly going to be the basis for much more disciplined economic policy for euro area members. It’s certainly going to be helpful in the present situation.”
Europe’s two bailout tools – the European Stability Mechanism, or ESM, and the European Financial Stability Facility, known as EFSF, will be managed by the ECB and the ESM will be capped at 500 billion euros.