Deal reached on EU economic governance laws

It will come up for discussion by eurozone finance ministers at an informal gathering in Poland, beginning Friday. A final meeting of parliament, presidency and commission delegates is expected Monday to tie up loose ends. MEPs will then vote on the agreement in a plenary session at the end of September.

Under the deal, sanctions for countries that run up an excessive budget deficit will become easier to impose, though are not as automatic as some in the parliament would have liked.

Deficit sinners will be subject to a two-step procedure.

The commission will first issue a warning to the country, which has to be adopted by a qualified majority of eurozone members.

If after one month the warning has either been rejected by member states or simply ignored, then the commission can insist again on the warning. This time round, however, the warning is considered automatically adopted unless a majority of eurozone states - nine - say otherwise.

The commission can eventually impose a fine of up 0.1 percent of GDP for countries not acting to correct their deficit, while those countries falsifying their statistics could see a fine of 0.2 percent of GDP.

The slightly messy compromise is the result of haggling between MEPs and governments over how automatic to make sanctions. The current system was dealt a fatal blow when France and Germany in 2003 broke the rules on keeping budget deficits under 3 percent of GDP and went unpunished.

"We have struck a realistic balance between the will of member states and what we considered necessary", said one parliamentary source.

The deal also saw new language, pushed by the Socialists and Greens in the EU assembly, forcing the commission to look at export deficits (in places such as Germany, which exports more than it consumes) as well as current account deficits (as in Greece, which imports more than it exports) when drafting macroeconomic outlooks for the eurozone.

In addition, both sides agreed that finance ministers may be invited to appear before the parliament's economic affairs committee to explain when things are going awry. The ministers can turn down the meeting, but language stressing that attendance is "voluntary" has been removed.

The agreement was welcomed by conservative deputies but criticised by those on the left.

"The compromise agreement reached makes it possible to lay solid foundations of economic governance", said French centre-right MEP Jean-Paul Gauzes.

German Socialist deputy Udo Bullmann said "It fails to provide any incentives for growth and jobs. This could actually make things worse for the European economy which is facing the risk of recession".

Green deputy Philippe Lambert said the deal falls short of what is needed to get Europe out of the crisis: "This Six-Pack will fail to provide the basis for a robust and sustainable system of economic governance for Europe."

However, although deputies may disagree on the details, the fact there is any kind of agreement is of great symbolic importance.

Its slow progress through Brussels' legislative labyrinth saw politicians fret about what markets think on the EU's ability to react to the debt crisis.