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Since it came to power in July this year, the Slovak centre-right government has called for private investors to feel the pain of any rescue operation under the eurozone umbrella. It considers the Greek bail-out "essentially a mistake" and a "precedent" that made European governments a "hostage" of financial markets. "If we continue this way, we are close to a pyramid scheme," the Slovak prime minister, Iveta Radicova, told journalists after the Wednesday government session dealing mainly with Ireland (24 November). She warned that a system of accumulating debts eventually risked falling like "a house made of cards". "Once again, taxpayers are expected to pay the bill. Once again, the banks are being rescued," Ms Radicova said, hinting that Lisbon and Madrid could be next going cap in hand to their EU colleagues.

German Chancellor Angela Merkel on Tuesday (23 November) warned that the euro is in an "exceptionally serious" situation as the European Commission issued a veiled warning to the Irish political class not to topple the government. "I don't want to paint a dramatic picture, but I just want to say that a year ago we couldn't imagine the debate we had in the spring and the measures we had to take," she said in a speech in Berlin to the Confederation of German Employers, the BDA.

Meanwhile, EU economy commissioner Olli Rehn issued a veiled warning to Irish opposition politicians not to topple the government. Speaking to reporters in Strasbourg asking about worries the Fianna Fail-Green government in Dublin could fall, Mr Rehn said: "Stability is important." "We don't have a position on the domestic democratic politics of Ireland but it is essential that the budget will be adopted in time and we will be able to conclude the negotiations on the EU-IMF programme in time."

Portuguese, Spanish and EU leaders, alarmed at the seemingly unquenchable vengeance of this marketplace leviathan, insisted that the two Iberian nations were very far from having to follow Ireland and Greece in asking for bail-outs.

EU economics chief Olli Rehn sought to buttress the the standing of Portugal insisting on the "very different" situation between Lisbon and Dublin, while the head of the eurozone, Luxemburgish Prime Minister Jean-Claude Juncker described the market vigilantism against Portugal and Spain as "not justified". Railing against the state of affairs, Mr Rehn told MEPs on Monday: "Any talk of deconstruction of the European project is irresponsible. All member states would have been in a much more difficult situation without the European Union and its political shield."

Eurozone neighbours are pressing Ireland to raise the 12.5% corporation tax rate as part of negotiations for a rescue package but Dublin is resisting, arguing that it is crucial for foreign investment. Irish Deputy Prime Minister Mary Coughlan told parliament the corporate tax rate was "non-negotiable". European Minister Dick Roche echoed that comment, saying "it is certainly not up for negotiation". "There has been some very unhelpful chatter in the background in the last few days about our corporation profit tax. Where would be the sense of destroying one of the great drivers of growth?" he told BBC television. Britain and Germany have long viewed low Irish taxes as a form of unfair competition and the finance ministers of Austria and France said the corporation tax may have to be raised as part of any deal. Michael Meister, a deputy leader in parliament and finance expert for Angela Merkel's Christian Democrats (CDU), said the country needed to consider raising the levy. "The Irish rates are below the European Union average," Meister told Reuters on the sidelines of the CDU annual party congress on Tuesday (16 November). "I therefore see here at least a possibility, given the high [Irish] budget deficit, to improve revenues without causing a negative impact on growth," he added. Meister's comments come one day after Elmar Brok, a senior CDU lawmaker who has sat in the European Parliament since 1980, said Ireland may have no choice but to raise the rate. "Ireland has two options to consolidate its budget – cut expenses even further or increase taxes like the corporate tax rate," Brok said at the congress in Karlsruhe.

The centre and left of the European Parliament have robustly condemned the outcome of the European Council, complaining that the interest of the bloc as a whole has been sidelined in favour of national interests. It is common for the groups in the parliament to criticise the results of European summits, but the missives issued the afternoon following the meeting were abnormally trenchant.

The Party of European Socialists "condemned" the result, attacking the "conservative leaders" who hold a majority in the Council. "The Conservative leaders are fundamentally mistaken. Yet again they have failed to take control of the crisis," said Poul Nyrup Rasmussen, the former Danish prime minister and leader of the PES. "The reaction of the Markets illustrates this clearly." Mr Rasmussen pointed to the overnight downgrading of Irish bonds by the Moody's credit agency as signifying that the investors were unconvinced by the council's plan. He warned that the EU Council had put itself in "direct conflict" with the parliament over its refusal to countenance any move towards debt issuance at the EU level. "The German, British, Swedish and Dutch Governments formed a roadblock to progress on the eurobonds issue. So blatantly putting national interest before European recovery is short-termist and lacking in leadership," he said.

The European Parliament must be consulted on the treaty change, but it has no co-decision power under the 'simplified revision procedure' - the new method the EU leaders are using to deliver the limited treaty change while avoiding any national referendums. But, depending on the fine print of how the permanent bail-out fund is constructed, it may have approval powers. The EU prime ministers and presidents at the summit did not take any decisions on the details of the fund. According to a parliamentary legal expert, if the European Council itself develops the mechanism on an 'intergovernmental' basis, and the fund is similar to the existing €440 billion rescue mechanism, which involves a series of loan guarantees by member states, then the chamber will only be consulted, as with the treaty change. But if the EU is asked to develop and present a proposal, or if it involves any direct EU funds as well as national loan guarantees, then "this is part of the community method, and the parliament has co-decision powers". The Greens also said that the permanent crisis mechanism "will not be enough to get Europe out of the crisis."

The public would be spared from further pain in bailing out banks in the future, with bondholders instead footing more of the bill under plans unveiled on Thursday (6 January) by the European Commission to give EU national regulators more powers to intervene ahead of any crisis.

"The impact on taxpayers is obvious," the EU executive said in a statement, adding that the existing arrangements covering how to deal with such crises retained "serious shortcomings." "We must put in place a system which ensures that Europe is well prepared to deal with bank failures in an orderly manner - without taxpayers being called on again to pay the costs," said internal market commissioner Michel Barnier.

Against a background of growing fears that the eurozone's rescue fund would be insufficient should Spain or Belgium knock on its doors, the European Union's economy chief has called for a hike in the effective lending capacity of the EU's bail-out mechanism. "We need to review all options for the size and scope of our financial backstops - not only for the current ones but also for the permanent European stability mechanism too," EU economics and monetary affairs commissioner Olli Rehn wrote on Wednesday in an opinion piece in the Financial Times.

The commissioner issued the call after member-state representatives met in the European capital to discuss proposals to boost the fund ahead of a meeting of European finance ministers next week. Mr Rehn also issued a stark warning that for all the deficit-slashing austerity measures that European states have so far imposed, it is not enough. "There is insufficient ambition and a lack of urgency in implementation. That needs to change," he wrote.

Hungary, which is due to replace Belgium at the EU helm on January 1st, has said that further consolidation and enlargement of the 27-nation bloc will be among the key priorities of its six-month chairmanship of the Union.

Major European powers are putting the squeeze on Portugal to follow Greece and Ireland and knock on the doors of EU and IMF bail-out resources. Reports over the weekend quote senior European sources as saying Berlin, Paris and other core eurozone capitals are leaning heavily on Lisbon to apply for a financial rescue, although the Portuguese government continues to deny that any pressure is being mounted.

The eurozone core fears that if a firewall is not built around Portugal, investor nervousness could spread to Spain, a much larger economy than those of the two states - Greece and Ireland - that have already been bailed out. However, formal negotiations with Lisbon have yet to begin, the source continued, and discussions have yet to match the pace of similar talks ahead of the Greek bail-out last May or that of Ireland last November. Should Portugal decide to ask for a rescue, the bill would amount to between €60 and €80 billion, the source said.

Eurozone finance chiefs have backed new rules for stricter fiscal discipline, including automatic penalties. Meanwhile, France and Germany have spoken out in favour of a permanent bail-out fund that would require a change to the EU treaties. Under the previous set-up, eurozone governments which flouted rules limiting the size of their public deficit could only be sanctioned following a majority decision by their peers. As a result, scofflaws regularly got away without punishment.

The new "reverse majority" system agreed in Brussels on Monday (18 October) flips the framework on its head, with penalties automatically applied unless a majority of states oppose the move. Governments will be given a six-month period of grace in order to fix their excesses in a softening clause pushed through by France. Paris, as well as Warsaw and Rome had initially opposed the idea of automatic sanctions, while Germany insisted any reforms would not be credible unless they had some teeth.

This move would require an EU treaty change agreed by a fresh inter-governmental conference, coming hot on the heels of the newly-agrees Lisbon pact.

Just one year after the second Irish referendum on the Lisbon Treaty - one of the most bitter political battles in EU history - France and Germany are coming into an EU summit ready to pitch the idea of rewriting the legal pact. As the premiers and presidents of the bloc's 27 states arrive in Brussels on Thursday (28 October) for a two-day summit intended to endorse new fiscal rules, a last-minute deal between two of the EU's most powerful countries has caused shocked and anger across the continent.

Last week at a bilateral pow-wow in Deauville, France, President Nicolas Sarkozy and German Chancellor Angela Merkel cut a deal in which Berlin backed Paris in its desire to water down sanctions to be imposed on excessive-spending EU countries. In return, Paris endorsed Berlin's push for a change to the EU treaty in order to set-up an EU bailout fund and default mechanism. Ms Merkel is adamant that her country cannot endorse a repeat of the emergency bail-outs cobbled together this spring. Germany is the main bankroller of the €110 billion loan to Greece and of the European Financial Stability Fund (EFSF), the yet-to-be-tapped €440 billion rescue mechanism for the eurozone as a whole. Both of these funds have an expiry date of 2013 and Berlin is looking to see that something more substantial replaces them before then. The default mechanism would signal to investors that they, rather than taxpayers alone, would be on the hook for at least part of the costs of the bankruptcy of a country. The mechanism is designed to deal with sovereign defaults without setting off a cascading panic in the markets similar to the Greek debt crisis that shook Europe in spring. The idea is highly controversial, with even the reticent European Central Bank chief Jean-Claude Trichet voicing steadfast opposition.

Ahead of an EU summit opening today (28 October), Liberal group leader Guy Verhofstadt warned that the European Parliament was determined to use its new powers under the Lisbon Treaty and would not let economic governance plans be "diluted" by Germany and France.

But Verhofstadt, who leads the Parliament's Liberal group, warned that such backroom deals were now over. The European Parliament, he said, would have full co-decision powers on legislative proposals that will come out later in the year to flesh out the EU's new economic governance. His warnings were echoed by other political groups in Parliament, including the centre-right European People's Party (EPP), which commands the largest number of seats in the Strasbourg assembly. Iñigo Mendez De Vigo, a Spanish MEP in charge of institutional issues at the EPP, said he welcomed the Task Force's proposals. But he added that "they should take into account that the European Parliament is now co-legislator and will play its full part in defining the reforms to come".  "I regret that the French-German proposal does not even mention the European Commission, which also has a say on this issue," De Vigo said, adding the Parliament should also be more involved. The Greens, the fourth largest group in Parliament, also backed the Liberals and the EPP, in a move which could herald a long battle with member states over the economic reform plans. The Parliament "will be a co-legislator on four of the six legislative proposals" on economic governance, said Belgian MEP Philippe Lamberts, saying his group was "in favour of a more ambitious and broader economic framework than the Commission and Council". Verhofstadt said he hoped this new battle would not take nine months, referring to the time it took to pass a recent package of financial supervision laws through the assembly.

In a statement, Verhofstadt detailed the three key areas where the Task Force had diluted the Commission's initial proposal and on which he said Parliament was ready to pick a fight. First, the Commission had proposed to impose sanctions on member countries with excessive deficits or severe imbalances at an earlier stage, without delay. By contrast, the Task Force argues that a political decision should be taken on the proposed sanctions, meaning that they could be blocked by a country capable of putting together a blocking minority. The result is that there will be no preventive procedure and therefore no sanctions, the liberal group leader warned. Second, the Task Force foresees a "double filter" for decision-making, involving a political recommendation by the Council before the Commission can take action. In practice, this means the Commission will be allowed to take sanctions only after a certain period, Verhofstadt said. Finally, while the EU executive had proposed that corrective action or sanctions be initiated directly by its own services, the Task Force called instead for a recommendation that would need subsequent backing by the bloc's 27 finance ministers. "It's easy to change a recommendation, and far more difficult to change a proposal by the Commission, because in that case you need unanimity," Verhofstadt explained.

A common argument against flexible integration as a solution to increased preference heterogeneity is that a likely consequence for those member states opting out of the enhanced cooperation is a loss of status and influence generally in the European Union (EU). It has been argued, for example, that the decisions by Denmark, Sweden and the UK not to join the Euro is considered to be free-riding, which leads to a bad reputation and exclusion from informal networks. We test this proposed free-rider effect by comparing the network capital of Euro-outsiders with insiders in the Council of the EU, using survey data of more than 600 member state representatives. The findings speak strongly against the free-rider hypothesis, as the Euro-outsiders are highly ranked in terms of network capital.