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EU to Toughen Budget Controls, Curb Spending

European Commission President Jose Manuel Barroso (R)and European Council President Herman Van Rompuy arrive for a media briefing after an EU summit in Brussels, 29 Oct 2010

European leaders agreed to tougher budget controls to prevent future financial crises among states sharing the euro currency but balked at more radical sanctions pushed by Germany and France.

European leaders wrapped up a summit in Brussels agreeing to strengthen rules governing the 16-nation area using the euro currency. In particular, they backed tougher new sanctions to keep spending in check so the European Union does not confront another financial crisis like the one triggered by Greece earlier this year.

They also tasked the president of the European Council, Herman Van Rompuy, to come up with a permanent bailout mechanism for struggling eurozone members. That would replace a temporary fund which expires in 2013.

At the final press conference Friday, Mr. Van Rumpoy hailed the results.

"With the endorsement of the task force report and the decision on the way forward, for the European crisis mechanism, the European Council has sealed a solid pact to strengthen the euro. That's one of the most important decisions that, over the last months, we took," said Van Rumpoy.

But the 27-member EU balked at demands by Germany and France for tougher fiscal sanctions - notably withdrawing voting rights for particularly spendthrift eurozone members who violate budget caps. Doing so could have meant reopening the key Lisbon treaty governing the EU, which was the product of months of negotiation.

In remarks to reporters, French President Nicolas Sarkozy praised the final agreement -- even though he said he had no problem reopening the treaty.

Separately, Mr. Sarkozy responded to a new video threat by al- Qaida leader Osama bin Laden against France. The French President said nobody can order France around -- particularly not terrorists. He said that included references to a recently passed law in France banning the face-covering veil, which Muslim extremists have criticized.