"We agreed that the so-called stress tests of banks will be published at the latest in the second half of July," Van Rompuy told a news conference after a summit of EU leaders on Thursday.

Spanish Prime Minister Jose Luis Rodriguez Zapatero, also present, said publishing the results was the best way to stop rumors about the condition of Spanish and other banks.

"There is nothing better than transparency to demonstrate solvency," Zapatero said.

"These stress tests must be demanding in nature. We need to look at the most stringent tests possible in terms of our growth because that will favor our credibility," he said.

The EU has so far conducted only one stress test of its whole banking sector, not individual countries or banks. The results, shown in autumn 2009, said the sector was sound and could withstand a much worse economic downturn than had taken place.

But German Bundesbank head Axel Weber said on Thursday that a new set of European bank stress tests was needed to include a broader swath of the banking industry as well as new stress scenarios such as the sovereign debt crisis.

Speaking at a conference in Frankfurt, Germany, Weber — also a member of the European Central Bank's Governing Council — said he had pushed for disclosure of the stress test results "by bank and by country" on an international level.

Germany had been skeptical about revealing details of tests on the financial health and risk exposure of its banks, but has dropped its objections after France and Spain came out in favor of a move the United States has pressed Europe to take.

Banks remain undecided on whether disclosure makes sense.

The Association of German Banks, which represents large private-sector lenders such as Deutsche Bank and Commerzbank, said it may be open to disclosure, providing the results leave no room for "misinterpretation".

The German association of public-sector banks, which represents the troubled Landesbanken sector, opposes such disclosure.

European leaders are using a Thursday summit to try to fix deep, long-standing problems with their economy by forging tougher rules to rein in government overspending — and prevent another debt crisis.

Though the summit's formal focus is on long-term solutions, the 27 EU leaders also face more immediate worries about potential losses hitting European banks and continuing speculation about market pressure possibly pushing Spain to seek outside financial help.

EU finance ministers would likely decide in July on the details of how and when the tests would be done by national bank supervisors who are currently testing how well big financial groups could cope with worse economic situations.

They will discuss their results with the European Commission, the European Central Bank and EU governments at the end of June.

Marco Annunziata, an economist at UniCredit bank, says Spain's move to publish bank tests could encourage other countries to do the same, "allowing Europe to finally clear the air on the health of its financial system." "Greater confidence in Spain's financial system could in turn bolster market optimism on the country's ability to repair its public finances,» he said in a research note.

"If Spain fails, the euro zone's wheels will come off, derailing the continent's recovery and its financial system." EU nations are trying to calm volatile markets worried about Europe's soaring debts — both public and private.

Greece needed a bailout from EU governments and the International Monetary Fund to avoid an embarrassing default in May.

A massive "shock and awe" 750 billion euros ($1 trillion) financial rescue package for other indebted countries has failed to turn around the euro's slide in recent weeks as markets eye wider problems across Europe: A banking system that may not have fully owned up to losses from the 2008 crisis and the prospect of slow economic growth for years ahead.

Spain's total debt, both public and private, could top 300 billion euros, economist Daniel Gros estimates, and markets are treating the government as if it had debt far above its fairly prudent level of 64.9 percent of gross domestic product this year.

The spread, or the difference in interest rates between Spanish bonds and the benchmark German bund, rose to a record high Wednesday as investors saw more risk that the country could default.

Under pressure from markets and other EU nations, the Spanish government has agreed to labor market reforms to encourage companies to hire — and make it easier to fire — workers in an effort to cut its jobless rate, the highest in the euro zone at around 20 percent.

The determination to make long-delayed structural reforms, usually one condition of International Monetary Fund loans, and a scheduled meeting between the Spanish prime minister and IMF head Dominique Strauss-Kahn have fueled rumors that the country could be seeking financial aid options. Such speculation is strongly denied by the IMF and by Spain.

Separately, the European Union's executive says it will propose new sanctions for governments that break limits on debt and deficits as it toughens rules.

The European Commission says it will lay out its reforms on June 30 and make a detailed proposal in September for leaders to agree in October.

It is suggesting that governments jointly review each others' spending plans before they draft their final budgets, that the EU issue early warnings when countries run up debt or become far less competitive than their neighbors on key indicators such as wage levels.

Stricter oversight of national spending aims to prevent any more EU countries requiring financial rescue.

Britain is firmly opposed to discussing its budget plans with other nations or the European Commission before it draws up the final spending program. Germany is calling for harsh sanctions, such as stripping countries of voting rights if they break the budget rules.