Germany and France have agreed to soften a rigid new regime of fines for countries breaking the eurozone's budget rules a week before a crucial EU summit is supposed to ratify a punitive system aimed at shoring up the single currency.

Senior EU officials preparing the new rules, which have been devised to immunise the euro against a similar kind of collapse that it faced as a result of the Greek debt crisis, put a brave face on the sudden Franco-German hijack. But European Commission officials conceded that there had been a Franco-German stitch-up to weaken the way the new euro regime would operate and to leave it more vulnerable to political horsetrading.

In a another highly contentious move, Angela Merkel, the German chancellor, and Nicolas Sarkozy, the French president, also agreed to reopen the Lisbon Treaty, the EU's quasi-constitution, in order to force countries that find themselves in a crisis such as the one suffered by Greece to declare insolvency and to forfeit their voting rights in EU councils.

At a summit on the Normandy coast on Monday evening, Sarkozy yielded to German pressure to reopen the treaty in return for Berlin dropping its insistence that sanctions for fiscal sinners in the eurozone be automatic. The call to reopen the treaty will run into strong resistance, with European leaders exhausted by the bad-tempered nine years it took to finalise the Lisbon pact which came into force last year. Read fullarticle in the Guardian...