Angela Merkel forces Europe to protect euro from future collapse - by Ian Traynor

The leaders of 26 European countries bowed resentfully today to German determination to rewrite the EU's Lisbon Treaty to shore up the euro. Angela Merkel declared she was happy after a summit meeting of EU leaders in Brussels agreed to establish a stiff new regime aimed at immunising the euro against the threats that brought the currency to the brink of collapse this year.

Under the new system, to be in place by 2013, the Germans insist that highly indebted eurozone countries struggling to repay will be forced to restructure their debt in a process of "managed insolvency" and that their creditors will need to take large "haircuts".

The German chancellor said this was a quantum leap in the way the euro was run. "The inclusion of private institutions is very important to me," Merkel said. "We won't allow only the taxpayers to bear all the costs of a future crisis."

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