European Union leaders yesterday signed a treaty designed to force governments to adopt balanced budgets through a " golden rule "or face fines.

The TYeaty for Stability, Co-ordination and Governance, the bedrock response to a two-year public debt crisis that forced bailouts for Greece, Portugal and Ireland, was signed by 25 of the bloc's 27 leaders.

It will take effect once the first 12 of the 25 states have ratified the pact.

Ireland has already announced plans for a referendum before the treaty can apply there.

If states do not ratify the treaty, they will be blocked from bailout funding from a related rescue firewall being set up as of July this year. In the pact, states that fail to adequately implement the sharpened rules in national law will be dragged before the European Court of Justice.

The treaty updates the EU's Stability and Growth Pact, first agreed in the 1990s and last reformed in2005.

Few of the 25 states approving the treaty are within the EU' s traditional deficit ceiling of 3.0-percent of GDP

Under the so-called "golden rule," a country's structural deficit should be capped at 0.5 percent of gross domestic product. Countries with debts comfortably below the 60-percent-of-GDP EU threshold will get more leeway, up to 1.0 percent of GDP for the structural deficit, which does not include one-off effects such as debt repayments.