WHAT exactly have Nicolas Sarkozy and Angela Merkel agreed?
The French and German leaders have decided that the Lisbon Treaty is not fit for purpose. They are going to ask the rest of the EU leaders to accept a new tougher treaty. France and Germany want all 27 members to join, but realistically the likes of the UK and Sweden will run a mile, so a new treaty for just the 17 euro countries is more likely.
Surely all this will take years?
The two leaders said they want to get the ball rolling when European leaders meet on Thursday and Friday this week. They want a deal on the new treaty finalised by March next year, though it wouldn't have to be ratified until after the French Presidential election.
Are they saying Ireland was right to reject the Lisbon Treaty?
They certainly don't think Lisbon is working. Ms Merkel and Mr Sarkozy believe the euro is at risk because the single currency project is only half finished. To fix it they've proposed fast tracking a leap towards fiscal union, getting all countries to share a set of budget rules.
What kind of rules?
Countries that sign up to the new treaty will add a clause to their constitution that bans their governments from overspending in future. If they break the rules they can be hauled in front of the European Court of Justice. One point worth keeping an eye on for us is a change that will make it harder for small countries like Ireland to block decisions at the new permanent bailout fund.
Will there be a referendum?
Yes, if Enda Kenny and the other leaders agree to changes it would have to be put to the people here, and possibly also in France and Germany. If the treaty is agreed in March a referendum could happen here in late 2012 or early 2013.
So is the euro saved?
Not yet. The changes on the table could take years to implement. The plan is bound to meet political resistance.
So why have they done it?
Ms Merkel and Mr Sarkozy have taken the view that the euro cannot be saved under the current system. If they follow that logic, but think the euro is worth saving, then it has to be through this kind of radical plan.
But don't the markets need a quick fix?
Yes, and they got it. Yesterday Ms Merkel dropped her insistence that bondholders would have to share the pain of any bailout after 2013.
... and corporation tax?
There was no mention of moves to harmonise tax.