The deal has been struck on the principle, but it will now be up to the European President, Belgium's Herman Van Rompuy, to lead efforts to work out the details.
Mr Van Rompuy is upbeat about the mechanism that is supposed to ensure Eurozone member states stick to their budgetary commitments: "The absence of such a mechanism nearly led to the collapse of the Eurozone. Today European leaders all agree on the need for a permanent crisis mechanism."
Mr Van Rompuy now has the task of heading efforts aimed at developing this mechanism and establishing which measures are needed.
Belgian Premier Leterme (Flemish Christian democrat)confirmed that there was a deal to look at how the Lisbon Treaty could be adapted taking account of the objections of the Constitutional Court. The broad outlines of a crisis mechanism will now be worked out. The results will be put to the EU Summit in December.
Mr Leterme insisted that the changes to the Lisbon Treaty would not be fundamental. In this way the complicated procedure of ratifications by the member states including referendums can be sidestepped.
The European Council also clarified its position on the EU budget. It believes that caution is required and there is a call to the European Parliament to take account of the difficult budgetary situation in the member states. Earlier the British Premier David Cameron led opposition to a budget increase worth 6%.