European leaders have agreed a raft of measures designed to tame volatile energy markets and reduce soaring bills for households and businesses across Europe.

For weeks, the EU has been gridlocked over proposals for a wholesale cap on the price of gas. Fifteen countries, including France, Spain, Italy and Belgium had signed a joint letter urgently calling for a cap to be introduced, but opposition from Germany and the Netherlands had blocked the move.

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A series of compromise measures, including a limited mechanism to cap the price of gas, were agreed following a meeting of European heads of state in Brussels this week.

The agreement was announced by EU Council President Charles Michel and EU Commission President Ursula Von der Leyen in the early hours of Friday morning.

"We are going to establish a market correction mechanism exactly to limit cases of excessive gas prices and to make sure that there is a clear order in the build of the market," Von der Leyen said in a press conference.

Franco-German thaw

The agreement is also a sign of thawing relations between France in Germany. 

Paris and Berlin have been at loggerheads over the plans for weeks. Their governments had been slated to hold joint cabinet meetings next week, but these were postponed due to diary clashes for German ministers. That's bought both sides more time to find common ground.

While EU leaders worked late into the night hashing out energy proposal, agreements on foreign policy issues were reached far more quickly.

The council approved proposals for an EU military training missions for Ukrainian troops, with President Emmanuel Macron confirming that 2,000 of Kyiv's troops would be trained on French territory.

Macron also called for a European strategic autonomy as leaders discussed the bloc's changing relationship with China.

While broad agreement on energy issues has been reached, it's now down to the EU Commission to draw up detailed plans of what a price cap might look like before putting the plans to EU energy ministers for approval.

If ministers can't reach a final agreement, it looks likely that another EU leaders meeting will be called in the hopes of finally reaching an EU-wide energy deal.