European Union leaders have agreed broad guidelines for tougher budget rules and closer economic policy co-ordination to show financial markets they can contain a euro zone debt crisis and prevent its repeat.
The 27 member states agreed at a summit in Brussels on the need for more transparent "stress tests" for banks to show their financial health, and that the results should be published in the second half of July.
Hoping to avert any future debt crises, they said countries that do not meet budget and debt targets should face tougher sanctions and that budget plans should be submitted to the executive European Commission for peer review before national parliaments.
They also agreed on proposals for a European bank levy and said they would propose a financial transaction tax to the Group of 20 developed and developing countries at a summit in Toronto on June 26-27.
"Today the European Council (of EU leaders) has rolled up its sleeves and shown we can act together when there is a joint political will by member states and the European institutions," European Commission President Jose Manuel Barroso said.
The EU, which represents more than 500 million people, agreed last month on a €500 billion safety net to help struggling countries that use the euro and a 110 billion euro aid mechanism for heavily indebted Greece.
But it has struggled to allay concern that debt repayment problems that began in Greece will not spread to other countries in the 16-country euro zone such as Spain.
While Irish officials had expressed reservations about the cumulative impact of new regulatory measures on bank capital and any resulting need for more capital, Taoiseach Cowen was forthright in support of new charges on the bank sector.
"I think is important given that taxpayers in every country have had to involve themselves in recapitalising the banks that obviously there has to be procedures put in place whereby banks would make a contribution back to the wider economy and to national exchequers in due course", Mr Cowen said.
One leader after another rallied around Madrid, praising austerity plans it has announced to address its problems, and markets were boosted by a successful bond auction in Spain.
The leaders did not set out to secure formal agreement on how to deepen policy coordination, and the tougher budget rules will not be set in stone until after a task force reports back to them on reforms to defend the euro in October.
But they had hoped to give a display of unity to calm the nervousness on markets that has helped drive down the euro and global shares this year.
The leaders reviewed the task force's findings on how to prevent debt building up, increase cooperation and set up a permanent aid mechanism for countries in debt trouble.
EU leaders broadly concur on the need for closer policy coordination, or "economic government", and for tighter financial regulation, but do not agree how to go about it.
Differences linger between German Chancellor Angela Merkel and French President Nicolas Sarkozy, who lead the euro zone's biggest economies, despite agreement on some issues at talks on Monday.
Britain is also hostile to parts of the drive towards closer budget surveillance and says it will not allow its budget plans to be submitted to the European Commission for review before the national parliament.
But EU diplomats said a phrase in a summit statement saying such moves must take account of national budget procedures addressed British concerns and did not cross what Prime Minister David Cameron said were his "red lines".
"We of course always defend our national interests as others do, and our national red lines, but we know how important it is that there is in Europe growth and confidence and that, I think, is the most important issue on the agenda," said Cameron, attending his first EU summit.
The leaders agreed on a growth and job creation strategy for the next decade and also on a European banking levy, even though other world economies have avoided this.
They have said they are ready to go it alone with the bank levy, intended to raise money to help battle future crises from institutions widely blamed for the global economic meltdown.
Agreement of more transparent bank stress tests follows pressure for European regulators to publish results of stress tests on individual banks to restore market confidence and overcome a partial freeze in interbank lending.
Some countries, such as Germany, have been reluctant to publish the results of stress tests for individual lenders that could lay bare unpleasant details about their financial health.
Bundesbank head Axel Weber said a new set of European bank stress tests was needed to include a broader swath of the banking industry as well as new stress scenarios such as the sovereign debt crisis.
Barroso said he had confidence in the overall resilience of the European banking industry and backed the calls for the results of stress tests to be published on a bank-by-bank basis, saying this would help remove "unfounded suspicion".