European Monetary Affairs Commissioner Joaquin Almunia yesterday backed a compromise proposal on EU budget rules under which member states, not the European Commission, would decide what steps a country should take to reduce an excessive deficit.

"Broadly I think that the Irish compromise is a very, very good base for an agreement, and I hope that this agreement will take place tomorrow," Mr Almunia told reporters at a meeting of Socialist leaders ahead of an EU summit due to conclude a constitution for the bloc.

He was referring to a proposal under which the Commission would determine whether or not a state had exceeded the EU deficit ceiling of three percent of gross domestic product but member states would decide on recommendations to that country.

Germany, Poland, Italy and Greece launched a last-minute drive last week to water down the EU executive's powers to enforce budget discipline, which had been strengthened in the draft constitution drawn up by a Convention of lawmakers last year.

The Irish compromise was widely seen as a victory for deficit sinner Germany, since it is expected to breach the EU deficit cap for the third year running this year.

But Mr Almunia put a brave face on the Commission's defeat. "It's not as bad as in the letter of the four. If this Irish proposal, made in between the Commission position and the four member states' position, is adopted, we can live with it."

Belgian Finance Minister Didier Reynders also backed the compromise, although Belgium had earlier supported the Netherlands in pressing for strong enforcement powers for the Commission.

"There is now a new document from the Irish presidency and I am sure that it is a good document," he told reporters on arrival at a meeting of liberal leaders.