The outcome of the latest European Summit has once again failed to deal with the underlying causes of the sovereign debt crisis and the split it has caused may lead to another crisis, this time impacting on the future of the Union itself rather than just the Euro.
 
The result is close to a worst-case scenario for Ireland with the government’s negotiating tactics having been flawed from the start.
 
This summit was charged with providing a final and decisive answer to the sovereign debt crisis which is now impacting on all 17 states in the Euro.
 
At meeting after meeting for the last year and a half there has been talk of ‘drawing a line under the crisis’, ‘putting a firewall in place’ and ‘showing Europe’s resolve’.
 
The driving policy has been one which has placed the emphasis on trying to show how tough Europe will be in enforcing austerity now and in the future. Tacked-on to this have been mechanisms to fund bailouts where investors refuse to buy the bonds which countries need to re-finance their debts and run public services.
 
This strategy has failed miserably.
 
The reason is simple – the crisis wasn’t caused by budget deficits.
 
Europe is heading headlong over a precipice with the right answer to a different problem.
 
Countries such as the USA and the UK with much worse debt and deficit problems than the Eurozone have had no problem borrowing from the markets. The reason is because they have what the Eurozone does not, central banks which are willing to step in and guarantee a market for issuing new sovereign debt.
 
What has actually happened is that all of the effort of the Union has gone into providing funds for bailout rather than providing funds to prevent bailouts being necessary.
 
The ECB is now in the perverse situation of actually encouraging investors to flee European debt.
 
This is because it is buying bonds from existing investors who are using this as an opportunity to leave the market.
 
Every single time the European Council or ECB has restated the unwillingness to change this policy, short-term rallies have been followed by the borrowing costs of countries rising, often dramatically.
 
If the many billions of the ECB were to be turned to the primary bond market rather than the secondary market it would overnight end the crisis.
 
There are many ways this could be done either through a change of the EU treaties or within them, but on Friday it was decided not to do this.  It was a case of carry on regardless of the mounting evidence.
 
It very much reminds of Einstein’s definition of insanity: the tendency to keep doing the same thing while expecting a different result.
 
The fiscal control pact which was agreed on Friday morning has not only failed to address the core problem of the lack of resources supporting the bond market; it may lead to a much deeper crisis, this time undermining the Union itself.
 
The specific controls within the agreement require more study, but appear to threaten any prospect of serious long-term growth and employment creation in much of Europe.
 
This was a rushed and badly prepared summit.  Countries like Ireland largely sat on the sidelines forwarding their negotiation point late in the day and without the time for the shuttle-diplomacy which has been central to every successful negotiation in the past.
 
The Taoiseach has held one bi-lateral summit with a Eurozone leader in nine months and none since the Berlin fiasco of last month.
 
There appears to have been no deep effort to find a compromise. The agenda was ultimately steamrolled without even a basic agreement about how issues would be handled in the absence of Britain.
 
Even in the unlikely event that the other 26 states all sign up to the new fiscal pact, the Union’s fundamental workings will be in question for the first time in its history.
 
The institutions of the Union have a legal obligation to work in the interests of all citizens. How can that happen when some are in and some are out of an agreement which is central to everything the Union does?
 
For Ireland, assuming that the stated Franco/German policy of pushing for corporate tax harmonisation is left to one side, the absence of Britain from key discussions and regulations is a huge threat to our long-term economic prospects.
 
They are both our largest trading partner and our biggest competitor. The tens of thousands of jobs dependent on the financial services sector are only part of the areas for concern.
 
The fact that the government has to get advice on the agreement before it can tell us what its impact will be is a serious concern.
 
It is consistent with an approach to negotiation which has been deeply flawed.
 
Inspired by a refusal to give up domestic political points-scoring, the government has repeatedly said that fiscal rules would have stopped Ireland’s economic crisis from happening.
 
By doing this it has signed-up to the flawed agenda that new budget controls are the main solution.
 
At no stage has the Taoiseach been willing to admit the fact now acknowledged throughout Europe that Ireland and Portugal were forced into bailouts in the name of a flawed policy.
 
He has finally been willing to state in Brussels what he will not say here, that Ireland borrowed billions for bank debt because of commitments to Europe.
 
The case for Ireland’s bank debts being made more sustainable is stronger all the time and I believe it will be conceded if the government puts aside domestic politics and is more forceful in stating Ireland’s case.
 
Unfortunately the other policies which are being put in place by Europe’s leaders are steadily making the problem worse.
 
I cannot imagine a previous generation of leaders would have handled this crisis so badly, with so little imagination and in such contradiction to the principle of solidarity upon which the Union was build.
 
If the Euro is saved it will not be on the basis of anything agreed on Friday.
 
What we should all fear is that the Union which has given Ireland and Europe so much may have suffered serious damage.