Leaders from 25 EU member states have agreed a new treaty to reinforce the single currency by toughening Europe’s budget rules.

Twenty-five of the European Union's 27 countries have signed up to the new treaty involving tighter fiscal rules, with only Britain and the Czech Republic opposed, EU officials said today.

In a message sent on Twitter, European Council President Herman Van Rompuy said 25 of the 27 members of the union had approved of the treaty - which calls on signatories to introduce a balanced budget rule into national legislation.

An EU official said separately that Britain and the Czech Republic were the two countries staying outside the deal, which is expected to be signed at a ceremony on March 1st, when EU leaders meet for their next summit.

However British prime minister David Cameron removed his promised use of a veto, although his foreign minister William Hague said there remained "legal concerns" about the involvement of legal insititutions such as the European Court of Justice.

There was unanimous agreeement that the permanent rescue fund, the

European Stability Mechanism, will come into force in July, some 12

months ahead of schedule.

Officially, the half-day summit focused on a strategy to revive growth and create jobs at a time when governments across Europe are having to cut public spending and raise taxes to tackle mountains of debt.

But differences over the limits of austerity, and Greece's unfinished debt restructuring negotiations with private bondholders, hampered efforts to send a more optimistic message that Europe is getting on top of its debt crisis.

The leaders agreed that a €500-billion European Stability Mechanism will enter into force in July, a year earlier than planned, to back heavily indebted states.

Europe is already under pressure from the United States, China, the International Monetary Fund and some of its own members to increase the size of the financial firewall.

Earlier today, Taoiseach Enda Kenny has said he has nothing to fear from a referendum being required to adopt the strict new fiscal rules.

As he arrived at the Justus Lipsius Building this afternoon, Mr Kenny said the Government had "no fear or concern or anxiety" about the prospect of a referendum on the fiscal compact, which will bind euro zone states to tight new budgetary limits.

"I have made this perfectly clear that when the text is finalised I will ask the Attorney General [Maire Whelan] formally to supply the Government with [her] response as to whether the agreed text, as finalised by the politicians, is in compliance with our Constitution.

"If it is in compliance with Bunreacht na hÉireann there will be no need for a referendum. If it's not, there will be a need. The Government has no fear or concern or anxiety about that," he said.

European Union leaders had gathered for their first summit of the year as a deteriorating economy and struggle to complete a Greek debt write-off risk sidetracking efforts to stamp out the financial crisis.

European shares hit a two-week closing low today as talks on the Greek debt swap deal stumbled on.

Speaking ahead of today's gathering Mr Kenny said he hoped it would conclude the debate on the fiscal compact.

The meeting, which got under way this afternoon, will have a narrow focus on the fiscal compact, and stimulus measures.

At issue now for the Government is the principle of adopting an international treaty, which will impose binding obligations on the Dáil and Seanad, without the consent of the people. Even if the Cabinet decides in the light of the Attorney General’s advice that no referendum is required, this question is considered likely to feature in any Supreme Court challenge.

Such a challenge is considered inevitable at this point, meaning the final decision on a referendum will be in the hands of the court.

Speaking on RTÉ's Morning Ireland today, Minister of State for European Affairs Lucinda Creighton said she was hopeful the core of the draft treaty would remain unchanged today.

"The key issues have been agreed on and we are satisfied with the text as it stands," she said.

She added that it would be difficult for us to remain in the euro zone if voters rejected the treaty.

"It would be a very sad day if we somehow decided to opt out of that (new treaty) and allowed the other 16 members of the euro zone to progress and try to find a solution without us," she said.

"I think it would make it almost impossible for us to continue as part of the currency union because being part of a currency union means you have to abide by the rules."

On the same programme, Sinn Féin spokesperson on Foreign Affairs and Trade Pádraig Mac Lochlainn accused the Government of "running away from debate" by not holding a referendum. He said his party would mount a legal challenge if a referendum was not put to the people.

Additional reporting: Reuters