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EU states fail to agree treaty changes

The 27 European Union leaders have failed to agree on changing their treaty and the 17 eurozone countries are now trying to reach their own accord, an official said today.

The EU official said other non-euro countries were invited to join the new treaty.

The new treaty is meant to set up much tighter rules on national fiscal policy for the 17 countries that use the euro in an attempt to solve the worsening debt crisis.

However, failure to get the whole EU to agree on the new rules is bound to complicate these issues.

Germany and France in particular had heralded the new treaty basis as an important step to emerge from the crisis, which has already dragged Greece, Portugal and Ireland into multibillion euro bailouts, but the failure to get all 27 EU countries to agree will probably be seen as a huge setback for European unity.

At the same time, the new treaty - which is likely to introduce more automatic sanctions for overspenders and force states to include debt brakes into their national constitutions - will draw the 17 country eurozone much closer together.

States will be forced to give up some central parts of their sovereignty, especially when it comes to deciding how much money to spend.

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The UK and eurosceptic Prime Minister David Cameron was seen as one of the main obstacles to reaching agreement among the 27.

French president Nicolas Sarkozy said the new treaty among the eurozone states should be written by March.

The president of the European Council said a new treaty would include 17 euro states plus six other EU states - but not all 27 EU members.

Herman Van Rompuy said the countries would provide up to 200 billion euro (£170.7bn) in extra resources to the International Monetary fund.

Mr Sarkozy said he would have preferred a treaty among all the members of the EU, but he could not because of the British position. He said the new accord should be ready by March.

He said Britain proposed that it be exempted from certain financial regulation and "we could not accept this" because a lack of sufficient regulation caused the current problems.

Mr Sarkozy also said two bailout funds meant to rescue countries having trouble refinancing their debts - the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF) - would be managed by the European Central Bank, though the details still need to be worked out.

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