BRUSSELS - All countries in the European Union, except Britain and the Czech Republic, agreed Monday to sign up to a new treaty designed to stop overspending in the eurozone and put an end to the bloc's crippling debt crisis, while also pledging to stimulate growth across the region.
The new treaty, known as the fiscal compact, was agreed at a summit of European leaders in Brussels on Monday. It includes strict debt brakes and makes it more difficult for deficit sinners to escape sanctions. The 17-country eurozone hopes that the tighter rules will convince investors that all countries will get their debts under control and restore confidence in their joint currency.
"We have a majority of 25 that will now sign up to the fiscal compact," Swedish Prime Minister Fredrik Reinfeldt said after the summit.
Although the new rules only apply to the 17 euro states, the currency union was hoping to get broad support from the other EU states, in the hope that the accord could eventually be integrated into the main EU treaty.
Britain had already said in December that it wouldn't sign the new treaty. Reinfeldt said that the Czech Republic didn't sign up because of parliamentary procedural problems.
The summit also promised Monday to stimulate growth and create jobs across the region, in a tacit acknowledgment that their exclusive focus on austerity has had painful side effects.
"Yes we need discipline, but we also need growth," said Jose Manuel Barroso, the president of the European Commission.
The leaders pledged to offer more training for young people to ease their transition to the work force, deploy unused development funds to create jobs, reduce barriers to doing business across the EU's 27 countries, and ensure that small businesses have access to credit. However there was no offer of any new financial stimulus.
"We must do more to get Europe out of the crisis," the leaders said in a statement.
Barroso said that there are still €82 billion ($107.5 billion) in development funds that have yet to be allocated and which small and medium businesses could use as guarantees to get funding from banks.
He also said that the Commission will dispatch action teams to the eight countries where youth unemployment is the highest and help fund apprenticeships and young startups.
Europe's debt crisis has put the continent and its leaders in an almost impossible situation. While they have to slash their deficits to reassure the financial markets and investors reluctant to lend to them, the debt crisis has also sent unemployment soaring. Many analysts, politicians and trade unions think that only government spending can restart growth.
Overall, 23 million people are jobless across the EU, 10 per cent of the active population. In Spain, unemployment has soared to nearly 23 per cent and closed in on 50 per cent for those under age 25, leaving more than 5 million people out of work as the country slides toward recession.
Even the most influential countries in Europe — which are generally better off — are suffering. The French government was forced Monday to revise down its growth forecast for its economy for the year from 1 per cent to just 0.5 per cent.
In fact, many now fear that Europe is on the verge of another recession, and leaders gathering in Brussels said that while austerity is important, more needs to be done for growth. Economists often note that cutting spending is just one way to slash deficits; another equally important method is to boost growth, which increases the amount of money pouring into government coffers.
While the leaders meeting in Brussels focused on walking the fine line between reining in spending and stimulating growth, the elephant in the room was Greece.
Greece and its bondholders have come closer to a deal to significantly reduce the country's debt and pave the way for it to receive a much-needed €130 billion ($170 billion) bailout.
French President Nicolas Sarkozy said Monday he hoped a final agreement on Greece will be achieved "in the coming days," either at a special meeting of eurozone finance ministers or leaders.
Negotiators for Greece's private creditors said Saturday that a debt-reduction deal could become final within the next week. If the agreement works as planned, it could help Greece avoid a catastrophic default, which would be a blow to Europe's already weak financial system.
But European officials are afraid that even that deal may not be enough to fix Greece's finances, with some blaming Athens for dithering on its promise to cut spending and introduce austerity measures.
Associated Press writers Don Melvin, Robert Wielaard and Raf Casert contributed to this story.