European Economic Policy Coordination Tightened
European Union leaders agreed on broad guidelines for tougher budget rules and closer economic policy coordination on Thursday.
The 27 member states also agreed on the need for more transparent "stress tests" for banks to show their financial health.
It is hoped that the measures will contain the euro zone debt crisis.
[Jose Manuel Barroso, European Commission President]:
"Today the European Council has rolled up its sleeves and showed we can act together when there is a joint political will by the member states."
Leaders said countries that do not meet budget and debt targets should face tougher sanctions. It is proposed that budget plans should be submitted to the executive European Commission for peer review before national parliaments.
[Herman Van Rompuy, European Council President]:
"Our priority is to have a solid and healthy banking system."
A potential European bank levy was also discussed. Plans for a global financial transaction tax will be presented to the Group of 20 Summit in Toronto at the end of June.
[Angela Merkel, German Chancellor]:
“We want to have a system of bank levies and taxes for financial institutions and we clearly said we'll first take the initiative to the G20. If we are successful then we do not need to take any further action because everyone thinks that a global initiative is the best thing. However if the G20 does not agree then we will revisit the issue at the European level."
The euro zone's biggest economies, France and Germany, have often disagreed about how to tackle the current crisis. But agreement was reached over these core issues.
[Nicolas Sarkozy, French President]:
"In terms of what concerns Germany and France, we are asking for this tax on financial transactions. We are even ready, as we said in Berlin with Mrs Merkel, to envisage its application even if this or that big actor does not want it."
Formal agreement on how to deepen policy coordination was not secured, and the tougher budget rules will not be finalized until a task force report is reviewed in October.
But the display of unity may calm the nervousness on markets that have helped drive down the euro and global shares this year.
Britain however is hostile to closer budget surveillance, and will not allow its budget plans to be submitted to the European Commission for review before the national parliament.
The European leaders also agreed on a growth and job creation strategy for the next decade.