Could this be the beginning of the end of the UK's membership of the EU? The Prime Minister definitely did the right thing in refusing to sign up to a new EU treaty unless the UK got safeguards for the City. It is possible that in 24 hours the deal looks totally different (EU negotiations, and I have covered many, are like that). But assuming that the proposal we have now - where 23 to 26 EU nations go for fiscal union (let's call it "FU") outside the EU treaties - is what we end up with, then this is where the fun and games really start.
As Nick Robinson has pointed out, there is going to be an inevitable and almighty bust up about the use of EU institutions to run the FU. The Prime Minister ruled out the use of the European Commission and European Court of Justice to run the new FU, which he has every right to do, but it is certain that the EU countries in the FU – that's pretty much all of them – are going to strongly resist haveing to create a parallel European Commission, a parallel Court, and a parallel European Council to run the fiscal side of affairs, just because of resistance from the UK. And if it's the Commission and 20-plus EU members against the UK on this, who would you put your money on?
Fiscal Union is the massive new project, which are are not part of, that will bring the FU members so much closer together than monetary union ever did – this involves shared sovereignty on such politically charged issues as tax and spending (rather than the rather technocratic conerns of monetary policy – you never get riots about exchange rates). The UK will be outside this, almost totally isolated, fighting battles on use of EU institutions with almost all its EU partners, with many of them – not just France – seeking to get their own back on the UK. The UK will be in an extremely difficult position. There will be endless crises and battles, and throughout it will be far easier for eurosceptics to make a positive case for leaving the EU - portraying the UK as a sort of free-market Hong Kong off-shore from socialist China. Even Dennis MacShane, the highly Europhile former Europe Minister, has just said there is now little point of the UK remaining in the EU. With enemies like that, Eurosceptics hardly need to bother having friends.
Until last night, I couldn't really see a feasible political path for the UK's to leave the EU; I do now. Looking back, it may well be that historians judge David Cameron's veto as the starting gun for the UK's departure from the EU. Just one last question: what do European citizens think about their governments losing sovereignty over tax and spending? I didn't notice anyone asking them, but perhaps I missed it.