On the first day of the gathering, clouded in the build-up by divisions over the response to the economic crisis and climate change, good news came as Ireland agreed in principle to ask citizens to vote a second time on the stalled Lisbon Treaty.

After several hours of negotiations overnight, leaders indicated that a deal on fighting global warming and the rescue package could also be sealed before the meeting ends on Friday.

"When it is unified, Europe sees ideas progress and can impose its values," said President Nicolas Sarkozy, chairing the last summit of France's EU presidency.

On the eve of the meeting, Germany's Finance Minister Peer Steinbrueck had blasted the idea of "tossing around billions" of euros.

But German Chancellor Angela Merkel quickly scotched any idea that Berlin would turn its back on the 200-billion-euro (260-billion-dollar) economic stimulus package put forward by the European Commission last month.

Germany was "aware of its responsibility as a large economy," Merkel said on her arrival. "For us, it's all about saving jobs in Germany."

Italian Prime Minister Silvio Berlusconi told reporters that broad agreement had emerged about the need for the fiscal stimulus package.

"We are all in agreement," he said after dinner with his peers.

Officials attending the talks said Sarkozy spent much of the day trying to head off opposition to the climate deal from countries worried about its impact on the economy and jobs with a growing number of EU countries now in recession.

"We will work on the text tomorrow," Swedish Prime Minister Fredrik Reinfeldt as he left the venue. "I think that it is very important to say that no one is diluting the objectives as such."

Berlusconi, one of the fiercest opponents of the previous proposals, eventually withdrew his veto threat.

"We are heading for a compromise," he said. "Italy is on the way to getting all it wants."

The EU's climate-energy package, the "20-20-20" deal, seeks to decrease greenhouse gas emissions by 20 percent by 2020, make 20 percent energy savings and bring renewable energy sources up to 20 percent of total energy use.

Diplomats and officials had earlier said Sarkozy had made a series of compromises designed to buy off opposition by countries including Italy, Poland and Hungary.

Sarkozy himself would only say that there had been "progress".

Ireland's willingness to stage a new referendum on the Lisbon Treaty by next October was greeted with relief.

According to a draft statement, likely to be adopted here, Ireland would try to hold a new referendum by October 2009 on the controversial treaty in exchange for guarantees on key issues including an assurance that it does not lose its EU commissioner.

"I would be hopeful that we would have agreement tomorrow," Irish Foreign Minister Micheal Martin told reporters.

Irish voters rejected the treaty, designed to streamline EU decision-making and institutions, in June.

Meanwhile, Belgian anti-terror police said they had arrested 14 suspected Al-Qaeda followers in a series of raids mainly focused on Brussels. One of those arrested was suspected of planning a sucide attack.

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