European Union leaders meeting in Brussels have agreed “in principle” to ask member states to maintain balanced budgets and to penalize offenders.

But officials say the new fiscal rules still leave room for country-specific circumstances that would be taken into account before a new “automatic” correction mechanism applies.

Some officials have described the European summit as a moment of reckoning for the common euro currency, under siege by Europe's burgeoning debt crisis. But the meeting opened Thursday night with leaders disagreeing on how to resolve the two-year debt contagion that threatens the stability of the world economy. France and Germany want to change the EU treaty to incorporate a penalty clause for countries that exceed their budgets. They also want a unified corporate tax rate and a new financial transaction tax. But Britain, which does not use the euro, has expressed concerns that the plan would undermine its sovereignty.

European Commission President Jose Manuel Barroso called on national governments to act in the common European interest.

U.S. President Barack Obama told reporters in Washington that Europe is prosperous enough to resolve the debt crisis if its leaders have the political will to act.

The economy in the 17-nation bloc that uses the euro has all but stalled, with some analysts saying it has already dipped into a recession. The European Central Bank took a modest step ahead of the summit to boost lending, trimming its prime interest rate a quarter percentage point to one percent, the second cut in two months.

But stocks slid on European and U.S. exchanges after the bank's president, Mario Draghi, dampened speculation that the central bank would increase its purchase of the debt of European governments as one way to cut their borrowing costs. A European regulator said the continent's banks need to raise nearly $154 billion to cover possible losses on government securities they hold.

French President Nicolas Sarkozy warned of sire consequences if an agreement is not reached Friday.

Fears that Europe's debt crisis could spark additional problems have sent jitters through the global financial markets and have prompted warnings from several top credit rating agencies.