The very nature and purpose of the EU has come into question, writes Denis Staunton in Brussels
When Luxembourg's prime minister Jean-Claude Juncker faced the press in the early hours of Saturday morning, he showed that the acrimonious end to the Brussels summit had not diminished his sense of humour.
"I am going to the United States tomorrow, where I will explain to President Bush the vigour and force of Europe," he said.
The collapse of talks on the EU's next seven-year budget following the referendum defeats for the constitution in France and the Netherlands has left the EU facing its deepest political crisis for a generation.
Mr Juncker warned that, as public confidence in the EU erodes and relations between Europe's leaders worsen, momentum is slipping away from the European project.
"I fear a long, creeping almost imperceptible weakening . . . a disparate and blurred future that cannot be described," he said.
The summit exposed a deep rift among EU leaders that goes far beyond the details of the budget negotiations and involves questions about the very nature and purpose of the EU.
Austria's chancellor Wolfgang Schuessel said Europe must now choose between two conflicting visions of its future.
"The British want a different Europe. They want more a market-oriented Europe, a large market, but no deeper union. Anyone who wants such a model leaves behind the European social and economic model which has served us well, which the citizens want and which has made us strong."
Tony Blair will this week tell MEPs about the priorities of Britain's six-month EU presidency, which starts on July 1st. Mr Blair, who is also chairing the G8 group of leading industrialised countries and Russia this year, wants to use the EU presidency to promote economic reforms directed towards a "new social model" for Europe.
Even Britain's closest friends in Europe, which include Ireland, will be reluctant to follow Mr Blair's lead after last week's summit.
EU leaders were almost unanimous on Saturday in blaming Mr Blair's refusal to cut Britain's multi-billion euro budget rebate for the collapse in negotiations.
In a dramatic turn late on Friday night, the leaders of some of the EU's newest and poorest states offered to sacrifice part of their EU subsidies to help pay the rebate to Britain, one of the richest countries in Europe.
Britain has long seen the countries of central and eastern Europe as natural allies in its campaign for a more economically-liberal and less politically-integrated Europe.
The new member states showed in Brussels, however, that they are committed to a different idea of Europe, and that they understand that London does not represent their interests.
Former Polish foreign minister Bronislaw Geremek, who is now an MEP, said yesterday the new member states retained an attachment to the EU idea that was disappearing in some western countries.
"For us, Europe and the EU are not something boring, something that has always been there. For decades Europe was a dream for us.
"Now that it has become reality, Europe is still precious to us. It is something one treats with care, and for which one is prepared to make sacrifices."
Before they got into the budget talks, EU leaders agreed in Brussels to put the ratification of the constitution on ice pending a broader debate about Europe's future.
Each member state will conduct that debate in its own way, but some are likely to adopt the model of the National Forum on Europe.
The Taoiseach said the publication of a White Paper on the constitution this year would mark the start of Ireland's debate on the EU's future. He remains confident that the constitution will eventually be adopted, but his optimism is not widely shared elsewhere in Europe.
The sharpest exchanges in Brussels were between Jacques Chirac, Gerhard Schröder and Mr Blair, and Europe may have to wait until all three are out of office before a strong political leadership emerges.
In the meantime, the sense of crisis in the EU looks set to contaminate policy areas unrelated to the constitution and the budget.
Yesterday European Commission vice-president Guenther Verheugen called into question the enlargement of the EU beyond Romania and Bulgaria, and warned that those two countries would not be allowed to join in 2007 unless they were fully prepared.
The commission will continue to pump out proposals, but few major initiatives are likely to find support in the current political atmosphere.
The EU's ambitions to play a bigger international role could also fall victim to an anxious mood among European politicians, who may be more reluctant to commit forces to EU military operations.
The euro is unlikely to collapse on account of the current crisis, but the currency could come under pressure as financial markets react to the sense of political chaos in Europe.
John Palmer, policy director of the European Policy Centre, a Brussels think-tank, believes that Europe's international partners and competitors will watch developments carefully.
"Well beyond the borders of the European Union there will be concern, not that the EU is now facing some kind of unravelling or disintegration, but that it will be paralysed as a major force in world affairs while these debates continue.
"Opinion in Washington seems divided between those who want to see a more united and effective EU and those who openly celebrate its failure to act as an effective player on the global scene.
"In Moscow and Beijing this evident faltering of the European Union project will be factored into their own international strategies."