EU agrees new 'Lisbon Treaty'

"With this agreement we have managed to get out of stalemate...we will be ready to tackle the world's challenges", Mr Socrates said.

European Commission president Jose Manuel Barroso also branded the accord as "historic", providing the EU with the "capacity to act".

The decision effectively ends a six-year long period of trying to internally reform.

The first bullet in this battle was fired in February 2002, when the European Convention headed by former French president Valery Giscard d'Estaing started drafting the EU Constitution.

This project, however, was buried when French and Dutch voters rejected the document in 2005 - something that resulted in a two-year long phase of soul searching.

The deal

The final hours in the run up to Friday morning's agreement saw battles on two main fronts - with Poland and Italy seeking to strengthen their political weight within the 27-nation union.

In response to Warsaw's demands, a decision blocking mechanism - known as the Ioannina clause - will be written into a declaration of the treaty. However, the declaration will be linked to a legally stronger protocol, saying that the clause can be modified only by unanimous consensus of all EU leaders.

"We got everything we wanted", Polish president Lech Kaczynski said on Friday morning, adding this compromise means that the clause cannot be removed without his country's approval.

Another headline-stealing issue of the summit was how to distribute seats in the European Parliament among EU member states after the next EU elections in 2009. Italy was demanding to have the same number of deputies as France and the UK.

Under the newly-agreed treaty, Rome will get one extra MEP, while the president of the parliament would no longer be counted as a lawmaker in order to preserve the 750 overall ceiling of MEPs.

Originally, Italy was supposed to end up with 72 deputies, compared to 73 for the UK and 74 for France.

Finally, leaders also overcame Sofia's objections towards the spelling of the word 'euro' and agreed to use the spelling 'evro' in the Bulgarian version of legal documents and the treaty.

The date

The new treaty will be formally signed by all European leaders in Lisbon on 13 December and subsequently go for ratification next year, with a view to coming into place by mid-2009, ahead of the next European elections.

Among other things, the new treaty introduces an EU president, a post that can be held for up to five years, strengthens the post of its foreign policy chief and takes away national vetoes in areas such as terrorism. It also gives more power to the European Parliament.

CORRECTION - an earlier version of this article stated suggested that the Bulgarian spelling of the euro was to be further discussed. In fact, EU leaders agreed that 'evro' could be used in Bulgarian translations of official EU documents.