What's in the new deal to save the euro?

All European Union countries except Britain on Friday agreed to consider a new treaty that would see them give up crucial powers over their own budgets in an attempt to overcome a crippling debt crisis.

Q: Who's in it?

A: All 17 countries that use the euro are definitely signing up. Nine non-euro states - Denmark, Latvia, Lithuania, Poland, Romania, Bulgaria, Hungary, Sweden and the Czech Republic - said they would consult their parliaments before joining in. In some of those countries, however, parliaments are less than enthusiastic.

Q: Why is Britain not in it?

A: Prime Minister David Cameron gave a clear "no" after he failed to get concessions that would have protected Britain's financial services industry from regulations in the treaty.

Q: Why did Europe need a new treaty?

A: For the past two years, countries that use the euro have been rattled by a debt crisis that has sent borrowing costs for some countries soaring. Greece, Italy and Portugal required bailouts and worries are rising about Italy and Spain. Germany and France argued that only tough rules enshrined in a treaty would convince markets that all countries will be able to pay their debts and that a similar crisis will never happen again.

Q: How will greater fiscal austerity be achieved?

A: All countries that commit to the treaty cannot allow their annual deficits to exceed 0.5 per cent of economic output in normal times. That cap can be broken - and rises to three per cent - if there's a recession or other exceptional circumstances.

There will be automatic penalties for countries whose deficits exceed three per cent of GDP. In 2010, 23 out of 27 EU states had deficits of more than three per cent.

The European Court of Justice will make sure all states play by the rules.

All states have to tell their partners in advance how much debt they plan to take on through bond sales.

Q: What else did they decide?

A: The Eurozone, together with other willing EU states, will give as much as €200 billion ($268 billion) to the International Monetary Fund to help it rescue troubled nations.

Eurozone countries will set up a permanent bailout fund, the European Stability Mechanism (ESM), to take over from the current temporary fund one year ahead of schedule, in July 2012. Unlike the current fund, the ESM has paid-in capital, like deposits in a bank, and is therefore more credible on financial markets.

The ESM's decision-making process was simplified. In emergency situations, it will be allowed to rescue a struggling country if 85 per cent of its capital holders agree. That is meant to stop small countries that do not contribute a lot of money to the fund from blocking or slowing down urgent rescues, as has happened in the past.

The Eurozone eased rules on having banks and other private investors take losses when a country gets bailed out by the ESM. An earlier push to inflict losses on bondholders has been blamed for worsening market jitters.

Q: What did they fail to agree on?

A: Eurozone leaders did not decide to boost the overall firepower of the current bailout fund, which is currently limited to €500 billion ($669 billion). They promised to reconsider that cap in March.

They did not agree to give the European Commission more intrusive powers to control the spending policies of governments that break deficit rules, as had been demanded by European Council President Herman Van Rompuy and some nations.

They did not agree to give the bailout fund the power to directly help failing banks with loans. That power would have lessened worries that some governments' debt would swell if they had to rescue ailing banks.

Q: Will the summit's plan work?

A: Stock markets and the euro rose modestly in reaction to the deal, but many details remain to be worked out. Much will depend on whether the stricter fiscal rules can persuade the ECB to unleash massive funds to buy up bad eurozone debt.