EU leaders continue to debate growth measures

German Chancellor Angela Merkel and Italian Prime Minister Mario Monti stand with their backs to the camera as EU leaders arrange themselves for their family photo.

NEW YORK (CNNMoney) -- European Union leaders remained behind closed doors late Thursday as talks over a plan to boost economic growth and create jobs continued at a summit in Brussels.

European Council president Herman Van Rompuy stressed that the leaders have made progress on the so-called growth pact, which he said would mobilize €120 billion in "immediate measures."

While a final decision on the growth pact was originally expected earlier Thursday, it is now on the docket for Friday, said Helle Thorning-Schmidt, the prime minister of Denmark, which currently holds the rotating EU presidency.

"There is no blockage, the work continues," Van Rompuy told reporters, adding that the leaders will continue to debate the growth pact and other issues at a late-night dinner.

The main sticking point is a section on "financial stability," he added.

Thorning-Schmidt called the pact "a light in the dark," adding that it will "give hope to the Europeans that we are capable of taking decisions that will create growth."

The pact builds largely on existing economic policies and seeks to make the most of what limited resources the EU has to boost growth. It is generally viewed by investors as insignificant, since the amount of money involved is relatively small, equal to about 1% of eurozone economic output.

Despite the renewed focus on growth, expectations are low that leaders will arrive at a solution for the immediate crisis in the eurozone.

Italy has proposed using bailout funds to purchase government bonds. The goal is to ease borrowing costs for nations that are undertaking economic reforms, such as Italy and Spain. However, the move could come with conditions that those nations have so far been reluctant to accept.

The main details of the broader EU growth pact were hammered out last week by the leaders of Germany, France, Italy and Spain -- the four largest euro-area economies.

The centerpiece of the pact is a €10 billion increase in the funds of the European Investment Bank, which will raise its ability to lend by €60 billion, according to Van Rompuy.

The leaders have also agreed to the reallocation of €60 billion in unused structural funds to subsidize small businesses and reduce youth unemployment. They also backed a €10 billion program to test "project bonds," which will be used to fund investments in energy, transportation and broadband across Europe.

The move signals a shift away from the austerity measures that Germany, in particular, had prescribed in response to the debt crisis in the eurozone. Economic activity in Europe has slowed this year, with 11 countries judged to be in recession. The latest data point to continued deterioration in the current quarter.

The leaders are also discussing steps toward deeper integration, with the hopes of clarifying a path forward for the economic and monetary union.

Officially, the leaders will discuss "building blocks" to address the long-term challenges facing the euro-area economy, according to a paper by Van Rompuy and other top euro-area officials, including European Central Bank president Mario Draghi.

However, they are not expected make much progress on controversial plans to merge the liabilities of euro-area governments by issuing a common form of debt, such as Eurobonds or Eurobills.

Germany, the euro-area's largest economy, remains opposed to assuming the debts of other nations without a stronger political union to ensure that fiscal discipline is enforced.