Ecofin agreement on new rules that punish overspending governments

The EU said ministers ended months of sluggish negotiations on new rules covering national budget management that introduce financial penalties for states that repeatedly break a beefed-up Stability and Growth Pact.

The new rules, which the European Parliament may yet seek to toughen in negotiations on legislative drafts between now and June, represent "a key contribution for the discussions of heads of state or government on Europe's comprehensive response to the economic crisis," said Hungarian economy minister Gyorgy Matolcsy, who chaired the talks on behalf of the EU Presidency.

Ministers recognised "existing EU instruments did not generate a satisfactory decline of public debt and catered insufficiently for macroeconomic imbalances," a statement said.

New financial sanctions would be introduced for the 17 eurozone states and "these would apply earlier on in the excessive deficit procedure," the statement added.

Fines will ultimately be transferred into the EU's financial rescue funds.

While ministers were happy with their work, European Central Bank chief Jean-Claude Trichet said "we continue to think that the improvement in governance that is presently envisaged is in our opinion insufficient."

Swedish finance minister Anders Borg said "it is all about implementation in the future."

The proposed laws are part of vast efforts to prevent a repeat of the debt crisis that has rocked the euro and forced eurozone members Greece and Ireland to take huge international bailouts.