A very scary day, not one for Red Bull on the cereal whichever side you take. I've attended enough European summits over the past 20 years to know that we don't yet understand the full implications of what was agreed in Brussels early on Friday. Nor will we until the political dust settles and the small print is scrutinised over the next few days. 
 
 But it looks like the Big One, the moment when a government in London exercised the famous British veto on an important EU matter and withdraws to the margins of the European Union, thus ending 50 years of more-or-less consistent policy. What's more I've just heard Sir Ming Campbell, pro-European pillar of the Lib Dem wing of the coalition, saying that David Cameron had no choice but to do what he has done. Wow! No split there, then – or is that premature? Read on. 
 
 "Splendid isolation" was a celebrated British boast in the late-Victorian era, but that was then, when the British Empire was still – just about – the leading world power. Within a few years, London was drawn into defensive alliances to resist the rise of Germany and the stage was set for two bloody world wars, punctuated by the Great Depression. 
 
 So is today's isolation splendid or miserable? Is it better or for worse? Well, plenty are dashing on to radio and TV to assert both options with glib over-confidence. In refusing to join the emerging fiscal union Cameron has forced the EU majority to create what are known as "inter-governmental" arrangements, not formal EU arrangements. Paris and Berlin will not be pleased. 
 
 Yet I do not hear the sound of champagne corks or celebration among British Eurosceptics. Beware of what you wish for, is a wise saying. Who knows what happens now? But Europe, for all its follies and failings, has become a scapegoat for weaknesses that are really our own. We may be about to rediscover that awkward truth. It was why we joined in the first place. 
 
 As Nick Watt reports overnight from the Belgian capital, the break point for Cameron (who kept Nick Clegg and George Osborne in touch) was the need to protect the British financial services industry – our equivalent of BMW and Mercedes Benz, 10% of the UK economy – in ways the EU majority do not want to. 
 
 They want to scapegoat the banks, in Europe and the US, for their problems. Banks are very culpable, but their poor risk-assessment policies and arrogance are not the cause of the eurozone's crisis: the zone was poorly constructed in the first place, a triumph of hope over experience. 
 
 A French diplomat is quoted as saying that Britain had come to the summit like a man attending a wife-swapping party without bringing his own wife along. An interesting comparison that one, which suggests that Dominique Strauss-Kahn's corrupting influence in French public life may be even wider than appreciated. 
 
 But the analogy doesn't work. Paris has always left its wife – the common agricultural policy – at home, she's got a headache. It bends rules it devised when it suits its needs, always did: check it out. In wanting to stuff the City of London it was bringing along someone else's: ours. 
 
 Never mind, a British moneyman has just boasted on the radio that Britain's refusal to join the newly integrated fiscal union means it has just avoided boarding the Titanic. My personal prejudice lies that way, too – I can't see the democratic politics or the growth-denying economics of the eurozone working over the long haul – but I am not so confident as chummy is that we are right. 
 
 The Germans may be right, they may impose their will on France and other weaker neighbours or insist that transactions denominated in euros must be conducted within the eurozone, bad for the City. But they may also be wrong – the details of the very urgent eurozone bailout are far from complete and markets are falling – but the process of finding out will damage us as well as them. The Chinese will be watching scornfully. 
 
 Pro-European thinktank buff Charles Grant is on BBC Radio 4 saying it's a bad day for Britain which is left with only Hungary as its sole ally on the fringe of Europe – not a good place, to be sure. Actually, the Czechs and the Swedes (always a significant player) have not signed up either. As I say, it's very unclear at this stage. 
 
 Cameron has played a weak hand badly, says Labour's foreign affairs spokesman, Douglas Alexander. He's failed to nurture allies (remember, how he and William Hague walked out of the Euro-Tory group, the EPP, at Strasbourg?), he refused to help fund the Greek bailout and told Angela Merkel only last March that he didn't want to be in the room when the eurozone's problems were under discussion. 
 
 Well, he won't be now, even though he's changed his mind. The official position of British ministers – Hague has just been on air, too – is that if the 23 (or group of 25?) want to do things they can't use the EU's official machinery because the fiscal union is not a European Union matter, but an intergovernmental one, as France, the champion of nation states (especially its own), prefers. 
 
 There will be a lot of fuss about such principles and practices, but it won't hold. There is now a two-speed Europe, a Europe of variable geometry, as Hague has just explained. There are lots of just such examples, the Schengen agreement on border control (not working very well) or the Anglo-French defence co-operation agreement. Life will go on, he says. 
 
 Hague may not be crowing because he's got what he always wanted and Lady Thatcher would want too if she's still watching TV: a free-trade relationship with Europe, a bit like Switzerland, one Tory MP – the wonderfully named Mark Reckless – suggests. Not crowing will make it easier for Clegg and Co to bite the bullet. Ming Campbell's soothing words on BBC Radio 4's Today programme suggests it won't be too hard: power binds them in. 
 
 We'll find out some of the answers in the coming days and weeks – as well as the more important issue of whether the necessary steps are being taken to shore up the weaker members of the eurozone. My hunch is that they have not done it. 
 
 The financial muscle of the German surpluses has not yet been deployed to protect the borrowers, the Germans still want their money back. The European Central Bank is not yet the lender of last resort with the monopoly power to print electronic money and float the zone – and us – off the rocks of recession. Or do I mean the iceberg? 
 
 Is the European commission weakened, bypassed even, by what is in the process of being sewn up in its home city this weekend? Is the single market – central to Britain's vision of a free-trade Europe, looking outward to the world – weakened too? France and Germany do not share that Anglo-Saxon preference. 
 
 These issues are far bigger than our domestic politics. But they matter, too. I cannot see how the Eurosceptic Thatcherite right, which does not like or trust David Cameron, can do anything other than praise him for standing firm and protecting his vision of British sovereignty. How much British sovereignty will prove to be worth remains to be seen. 
 
 There again, they praised John Major's opt-out negotiation at Maastricht, too – at the start. 
 
 Labour will support the outcome but say that coalition carelessness forced Cameron into a binary choice that better diplomacy could have avoided. Ed Miliband will be right about that, but it will not make much difference. Public opinion, the bombastic faction and the tabloids will be pleased; for now. The dilemma is the Lib Dems' dilemma. A lot of people in the party, MPs and ministers too, will be very very unhappy. 
 
 Even David Owen – ex-Labour foreign secretary and SDP leader – who is brilliant but erratic, says he is unhappy, though he too opposed the euro. We didn't vote for this. Cameron had no mandate to isolate us, he is already saying. Lord Owen has no army to lead. But he remains formidable and will be talking to others. 
 
 If there are any Lib Dem ministers unhappy with the coalition, fired up with principle or ambition, now would be the time to "do a Robin Cook" and resign with maximum impact. I have not a scintilla of evidence to suggest Chris Huhne may be thinking hard today. He is clever, ambitious and pro-European. The Tories are being nasty about his green policies, the brutes, and he has unresolved issues over speeding points with the Essex constabulary. 
 
 Just a thought. ||||| Topics: GlobalPost, European Financial Crisis, European Union, News 
 
 This article originally appeared on GlobalPost 
 
 LONDON, England — After ten hours of negotiations at the European Union summit in Brussels — starting with canapes on Thursday evening and lasting past four in the morning today — the heads of the 27 European Union countries reached a decision to forge ahead with a two-tier solution to the euro zone’s debt crisis. 
 
 Crucially, the leaders of all 17 euro zone countries concluded that the only way to fix the euro’s flaws is by establishing a fiscal union that includes centralized control of national budget deficits. 
 
 But Britain will not be part of the negotiations defining the new fiscal union, setting the stage for a two-tier Europe. 
 
 Britain’s opt-out is a monumental development for Europe, and a significant defeat for Prime Minister David Cameron. 
 
 At other crisis moments over the last quarter century, as the drive towards closer economic and political union were being negotiated, the EU’s big three — Germany, France and Britain — always found ways to paper over their differences, issuing special opt-outs for Britain, or postponing decision making until the Brits got their house in order. Likewise, Cameron had sought a deal with Europe that would provide special exemptions for the U.K.. 
 
 But that is not what happened this time. With the EU and the global economy facing unimaginable consequences if the euro were to fail, this was not the moment to fudge and play politics with the solutions. There was no time to postpone a decision either. So Britain will not be part of the process. 
 
 The question that remains is whether that decision will lead to a solution of the crisis. 
 
 It was agreed overnight that the 17 members of the euro zone along with the six other countries will forge a new treaty linking them in a fiscal union with tough rules on debt. To achieve this will require some surrender of national control over the budget process. 
 
 In addition to Britain, Hungary said it wants to consider the details before deciding whether to participate. The leaders of Sweden and the Czech Republic will consult their parliaments before deciding. In the meantime, all three countries are now expected to take part in the negotiations. ||||| From my Morning Briefing email, sent out by 8.30am each weekday – sign up here 
 
 William Hague on the Today Programme, discussing David Cameron's decision to veto the EU deal (details below): "We have created world market confidence. We do that by controlling our own affairs". He stressed that Britain is "not changing" the terms of treaties and refused to say that Britain would be "isolated. 
 
 He said that Nick Clegg had "absolutely" agreed the decision to use the veto, but ruled out a referendum. "There are many different overlapping groups of cooperation, this is one of them… The important thing at the moment is for the eurozone to be stabilised, for the european economies to start growing again, and for Britain to defend its national interest". 
 
 Mr Hague also refused to answer whether Britain could be involved in an IMF bailout. "We are always involved in increasing the resources of the IMF" he said, but he said that the IMF is about the world economy, not the EU. "We won't agree an uplift [to our IMF contribution] to help the eurozone" he added. 
 
 VETO WIELDED 
 
 The veto has been wielded and David Cameron has presumably snuck off to bed – we've got a few hours before the EU summit meetings kick off, and the Prime Minister looked exhausted at his press conference at 5.30am (UK time). Now it's time for the rest of us to digest the deal he's (not) reached. 
 
 The main point is that Britain has vetoed the deal proposed by Germany and France and so will stay outside of any treaty changes. Instead, France and Germany will lead the 17 eurozone countries and six stringers in a new treaty. Britain is left outside with Hungary, and with Sweden and Czech Republic, who are consulting their parliaments. 
 
 Speaking earlier, Mr Cameron said that: "What is on offer isn't in Britain's interest so I didn't agree". He added: "I had to pursue very doggedly what was in Britain's interests, which is very difficult in a room where people are pressing you to sign up to things because they say it is in all our interests". He ruled out "surrenders of sovereignty" and "new rounds of integration". 
 
 In his own press conference, an hour before Dave's, Nicolas Sarkozy said that Britain had made "unacceptable" demands. The big fight was between Sarkozy and Cameron over exemptions from financial regulations (it's not clear which yet), hence the narrower deal. 
 
 The French are very angry – one French diplomat says that Britain is acting "like a man who wants to go to a wife-swapping party without taking his own wife". So too are the Europeans. The FT quotes an EU official who says "this is going to cost the UK dearly – they have antagonised everyone". 
 
 But the big question now is what will the 23 be able to do? Dave insists that he will stop them using EU institutions, a position backed by Jose Manuel Barroso, the European Commission President. But if the result is new institutions for the 23 (or the 25), then this looks less like a two-speed Europe and more like British withdrawal. 
 
 Certainly, it's no surprise that Mark Reckless, the incredibly eurosceptic MP, was on Today earlier heaping praise on the PM. Now we can be more like Switzerland, he said. Was that the plan? 
 
 WHAT THIS MEANS 
 
 This morning's news will be a shock to those used to hearing British prime ministers threaten a veto but never use it. As William Hague said earlier, the Prime Minister has done exactly what he said he would do: block a proposal that threatens Britain. But where does it leave us? 
 
 For starters, Edward Leigh owes Mr Cameron an apology, and a grovelling one at that (yesterday, the Tory MP compared Dave to Chamberlain). Beyond that, all is uncertainty. His decision puts the Coalition under immediate strain. For Britain to step out of the European consensus, to set itself apart, is a blow to core Lib Dem beliefs. How will Nick Clegg react? 
 
 Certainly, it looks like it will be difficult to reconcile the Cabinet. As Patrick Wintour details here , Vince Cable was calling for the Prime Minister to agree to a deal of the 27 even if meant sacrificing the interests of the City. Meanwhile, five Tory ministers, led by Iain Duncan Smith and Owen Paterson, want the PM to explain how he will renegotiate Britain's position in the medium term. 
 
 Mr Cameron was right to reject a deal designed by the French, for the French. At the heart of this dispute is France's desire to see Britain out of the EU, and the City marginalised. That was why they loaded the package with elements Britain could not accept. Downing Street officials are clear about what the French are up to, and why the Prime Minister had no choice but to say non. 
 
 BACKBENCHERS 
 
 Then there is the reaction of Tory backbenchers. Mr Leigh and his friends are unlikely to waste time clapping Dave on the back. They will demand more, no doubt a comprehensive renegotiation of British relations with the EU. 
 
 How will Mr Cameron manage those forces? He is meeting a group of his backbenchers at Chequers tonight, but he won't be able to ward off the demands for a referendum before his statement to Parliament on Monday. 
 
 I blogged yesterday that if it was an E17 deal, Downing Street was ready to press for EU institutions – Commission, ECJ – to be respected, and therefore Britain's voice to be respected. What about the wider point? How do the US and China view us this morning? We stand alone – and now what? This is a pivotal moment that is about far more than an internal Tory ding-dong. 
 
 ECONOMIC CATASTROPHE 
 
 Then there is the question that matters most: where does Britain stand in the EU and globally? What happens to the euro? Is the E17 a remotely credible proposition? Moody's has downgraded three French banks this morning – hardly a good sign. This morning, Italian 10 year bond yields are back over 7 per cent, as traders presumably wonder whether this deal will lead to any action from the ECB. 
 
 As Fraser Nelson notes in his column today (and in a blog post this morning), this deal isn't anything to do with saving Europe. "The European Union is being redesigned, and the French and Germans are quietly ticking off their wishlist. They have long wanted to bind the eurozone closer together, with similar rules on tax and spending." 
 
 Yesterday, Philip Hollobone won an award for the silliest comment of the day, when he said that "we need to have a disorderly breakup" of the euro to "boost growth". George Osborne disagrees. The Times has splashed on the Chancellor's comments to the Lords Economics Affairs Committee yesterday; George reckons that a eurozone breakup could cause a 7 per cent contraction of GDP, or the worst since the 1920s.
– David Cameron's decision to exercise Britain's veto and sit out negotiations on a new EU treaty is being seen as a momentous move, even if the ramifications aren't quite clear yet: New York Times: The decision "has left Britain as isolated as it has ever been in postwar Europe and effectively left out of future European decisions," write Sarah Lyall and Julia Werdigier. They add, however, that "there was widespread confusion over what this all actually means." Guardian: "I do not hear the sound of champagne corks or celebration among British Eurosceptics," writes Michael White. "Beware of what you wish for, is a wise saying. Who knows what happens now? But Europe, for all its follies and failings, has become a scapegoat for weaknesses that are really our own. We may be about to rediscover that awkward truth. It was why we joined in the first place." Global Post: "Britain will not be part of the negotiations defining the new fiscal union, setting the stage for a two-tier Europe. Britain’s opt-out is a monumental development for Europe, and a significant defeat" for Cameron, writes Michael Goldfarb. Germany, France, and Britain always found a way to find a deal in the past, but this time there was no leeway "to fudge and play politics with the solutions." Telegraph: "Mr. Cameron was right to reject a deal designed by the French, for the French," blogs Benedict Brogan. "At the heart of this dispute is France's desire to see Britain out of the EU, and (London) marginalized. That was why they loaded the package with elements Britain could not accept. Downing Street officials are clear about what the French are up to, and why the Prime Minister had no choice but to say non."