Europe tries to douse debt crisis

BRUSSELS - European leaders have agreed on a series of strong steps to stamp out the spiralling debt crisis, including consolidating public finances, bringing in the European Central Bank to ensure eurozone stability and possibly set up a European mechanism to preserve financial stability and prevent future crises like the one that has engulfed Greece.

The draft document still must receive final approval at an emergency summit that ran into early Saturday and came amid signs the contagion was spreading across Europe and beyond. However, there is little political will for more direct money for other indebted countries.

"Consolidation of public finances is a priority for all of us, and we will take all measures needed to meet our fiscal targets this year and the years ahead in line with excessive deficit procedures," the draft said, adding that all member states "fully support the ECB in its actions to ensure the stability of the euro area."

The draft also said that the EU would "propose a European stabilization mechanism to preserve financial stability in Europe."

Several leaders at Friday's meeting want to impose punishing budgetary rules which would force member nations walk a tight budgetary line and avoid the kind of cheating and overspending which led to Greece's problems.

Several leaders, including French President Nicolas Sarkozy and Chancellor Angela Merkel, insisted Greece and subsequent market moves targeting other euro-zone nations had left the whole framework of rules managing the euro in crisis and needed to be firmed up, according to officials close to the talks.

The officials spoke on condition of anonymity because of the sensitivity of the talks.

To deal with the crisis, some also wanted a deeper involvement of the European Central Bank.

"We must sharpen the edge" of the rules to keep wayward governments in line, Merkel said, adding the 16 euro-zone leaders should also consider changes to the 1992 treaty that laid the groundwork for the shared currency. "Otherwise, it won't work, in my opinion."

Opening an evening summit among visibly tense dinner partners, Sarkozy and European Commission President Jose Manuel Barroso insisted the crisis now had gone beyond Greece itself and affected the very roots of the currency. The summit was way behind schedule as the leaders continued to debate behind closed doors.

Canadian Finance Minister Jim Flaherty chaired a G-7 telephone conference of finance minister and central bankers on the Greek debt situation and he urged European countries to move quickly with a strong response.

"The sooner the better," said Flaherty, who declined to talk about the details of the talks.