European Union (EU) leaders reached an agreement on the landmark reform treaty early Friday, laying foundations to reform the 27-nation bloc.

"The Lisbon summit has achieved an agreement on a new treaty for Europe's future," Portuguese Prime Minister Jose Socrates, whose country holds the EU presidency, told reporters after marathon talks dragging into midnight.

The so-called reform treaty will soon obtain its formal name as Lisbon Treaty as EU leaders will officially sign it in Portuguese capital Lisbon at their next summit scheduled for Decmeber 13.

It is designed to replace the defunct Constitution Treaty rejected by French and Dutch voters in 2005, aiming to streamline the EU's decision-making mechanism in face of a globalized world and an enlarged bloc.

Describing the deal as a victory for Europe, Socrates said the EU now managed to get out of an institutional crisis which lasted around six years.

"We no longer have an institutional crisis. We are going to be ready to tackle the challenges of the future," he said at a joint press conference with European Commission President Jose Barroso.

Calling the treaty "a great achievement," Barroso said, "I believe we have a treaty that will give us now the capacity to act."

Among other institutional changes, the reform treaty installs a new foreign policy chief for the EU and a long-term president for the European Council to replace the current six-month rotating presidency, but it avoids any mentioning which may implicate a constitutional nature, such as EU symbols -- the flag, the anthem and the motto.

It also introduces the double majority voting system in decision-making, reduces the size of the executive European Commission, and gives national parliaments more power.

The deal was possible after last-minute concessions were made to some aggressive demanders, notably Poland and Italy.

Poland threatened to veto the treaty unless the so-called "Ioannina" mechanism, which allows a minority group of states disagreeing with a resolution to freeze it for a considerable period of time, was written into the new treaty, claiming the double majority voting system envisaged in the treaty would give bigger member states more leverage than before.

The double majority voting system requires at least 55 percent of the number of member states representing 65 percent of the EU's total population to make a decision at the Council of the EU, a decision-making body composed of member states' ministers.

Under a compromised arrangement, though there will be no Ioannina clause in the treaty, the European Council, composed of 27 EU leaders, will adopt a declaration on the substance of the Ioannina mechanism, making it legally binding. In addition, the declaration will be attached with a protocol, which requires consensus in any change to the Ioannina mechanism.

Another Polish demand, a permanent advocate general on the European Court of Justice, was also satisfied.

"Poland has got everything it asked for," said Polish President Lech Kaczynski after the talks.

Italy disagreed with the plan to redistribute EU parliamentary seats. According to the new rules, Rome's seats in the European Parliament should be cut from 78 to 72 in 2009, the biggest decline among member states.

In concession to Italy, the EU leaders finally agreed to add one more seat to the parliament, increasing the limit to 751 from the originally planned 750.

"The new extra member will be for Italy," Socrates confirmed. This will bring Italy's seats to the same number with Britain and one less than France.

Austria, which complained about a big influx of German students in its medical schools, demanded certain limits on foreign students who could be enrolled in its universities. This issue was also settled, the Portuguese presidency said earlier.

After signed in December, the EU reform treaty will be open for national ratification. It is expected to enter into force on Jan. 1, 2009 before the elections to the European Parliament in the same year.

Currently, an imminent test of the new treaty would be the call in some countries for referendum. At the press conference, Socrates shied away from saying whether his country will go to polls on the treaty.

British Prime Minister Gordon Brown, in his debut show at an EU summit as government leader, was facing tremendous pressure from his countrymen to hold a referendum on the Reform Treaty, although Britain negotiated complex opt-outs on police and judicial cooperation and from the Charter of Fundamental Rights, which will be given legally binding force by the treaty.

The late-night deal marked the end of the first-day meeting of EU leaders, who opened a two-day informal summit here.

"Tomorrow, Friday, we will be beginning to discuss the external dimension of the Lisbon Agenda. We will be discussing preparing Europe for the future," Socrates said when it was actually already in the early hours of Friday.

The Lisbon Agenda, set out by EU leaders also in Lisbon in March 2000, was originally aimed at making the EU the most competitive economy in the world and achieving full employment by 2010.

Its goals were later lowered to the achievement of stronger, lasting growth and the creation of more and better jobs after the previous ambition was proved too aggressive.

On the second day, Barroso was invited to give a key-note presentation, helping structure discussions with focus on two specific subjects, namely the recent financial turmoil and climate change, Socrates said in its invitation letter to his counterparts ahead of the summit.

(Xinhua News Agency October 19, 2007)