Europe

Euro crisis summit: Deal means less sovereignty

Belgian Prime Minister Elio Di Rupo talks to France's President Nicolas Sarkozy (R) at the summit in Brussels, 9 December
Image caption EU leaders talked through the night

In the end, it proved impossible to get a deal involving all 27 member states, and that pushes the European Union into new territory.

This feels like a sea change in the relationship between Britain and the EU, and in the way the EU itself operates.

If Britain was hoping Germany would be a little more sympathetic than France to its demands for safeguards on financial services, then it may have miscalculated.

There was no support from anyone significant for the British position and Prime Minister David Cameron felt he had no option but to walk away.

For the rest, almost everyone - including German Chancellor Angela Merkel - wanted an agreement involving all 27 countries. Only the French saw real advantages in a new eurozone-only treaty.

So 17+ is the best compromise they could find. It means that important EU countries like Poland, who are not yet in the euro but are committed to join, are not being left out in the cold.

And they are all signing up to some potentially revolutionary changes, involving real loss of national sovereignty.

Eyes on the bank

EU officials will trumpet the success of the deal on a new "fiscal compact" involving much tighter budget rules and automatic penalties for those who break them.

There was also agreement on bringing the eurozone's permanent bailout fund, the European Stability Mechanism, into force in July 2012.

This was a night of political drama, though, and the long-term implications of what happened will be debated for months to come.

There are still disagreements among the "in" group and concern from smaller countries about Franco-German domination.

It is also unclear how the future 17+ inter-governmental treaty will be able to utilise EU institutions like the Commission and the Court of Justice without the agreement of the "outs".

So there will be political and probably legal disputes ahead.

But there is a more immediate issue, which will be of primary interest to the financial markets.

Will the European Central Bank (ECB) judge that enough has been agreed in Brussels to allow the ECB to do any more to help protect countries which are struggling to pay their debts?

That will not mean becoming a lender of last resort - a commitment to the unlimited buying of bonds.

But the ECB could still do more, if it chose, to help bring down the cost of borrowing for countries like Italy and Spain.

Sovereign debt woes in several member states are still at the heart of this crisis, and if further action is not taken to resolve them, there may not be much of a eurozone left to haggle over.