It was the day that Europe united. It was the day that Europe split. To save the euro, up to 26 members of the European Union are to join a fiscal compact, submitting the core tax and spend competencies of the state to mutual supervision. If this actually happens, it will mean that the crisis of monetary union has driven them towards a political union they would not otherwise have embraced. Equally fateful is Britain's decision to stand aside. One or two other countries may sooner or later join the Brits, but even this would mean a split between a core union, embracing the large majority, and a small, scattered periphery.

Whatever follows, the European Union will never be the same again. Even if this ultimately proves to be a turning point at which history fails to turn, historians will mark the 9th of December 2011.

The Brussels communique announcing "a reinforced architecture for economic and monetary union" is anything but a resounding Jeffersonian declaration for future schoolchildren to recite. To compel anyone to learn it by heart would be an exquisite form of Belgian torture. Yet slash your way through its tangled thickets of Eurojargon and you find something remarkable. At least 23 – and possibly 26 out of 27 – states agree to bind themselves legally to balance their budgets, under the jurisdiction of the European court of justice and with deficit reduction programmes to be agreed with the European commission. More: for the 17 eurozone members, there'll be automatic sanctions if their deficit goes above 3%.

Welcome to a German Europe. In return, there are more funds for bailouts and at least a hint that the European Central Bank (ECB) will intervene more actively in the markets. Germany picks up the tab. On paper, that adds up to a big step towards a fiscal and transfer union for the current members of the eurozone, and eight others committed to join it in future. It's a step from the confederal towards the federal.

Because David Cameron refused to go along, this is to be done by "an international agreement to be signed in March or at an earlier date". Ironically, Cameron's veto on EU-wide treaty change means that the reform is more likely to happen fast. Ireland may hold a referendum on the deal. The Irish may say no. The Danes or Czechs might just cut up rough. Unlike an EU treaty change, requiring unanimity, this would merely result in there being one or two fewer inside, and one or two more outside.

There are still huge uncertainties on this continental journey into the unknown. Compared with what the United States Fed has done, this was no "big bazooka". Yields on Italian government bonds jumped nervously today. German medicine may well not produce the economic growth which is the only way to reduce Europe's burden of public and private debt in the longer term. The harshness of fiscal discipline may drive the peoples of Greece or Portugal to outright revolt. A leading bond market analyst tells me: "With the euro area's arteries clogged and its heart on the brink of failure, the ECB has said it is not qualified to perform bypass surgery, while the member states have pledged to go on a starvation diet … I'm surprised the markets aren't reacting more negatively and think they will later."

So the eurozone has plenty of crises still to come. I make no predictions. But if it survives and strengthens, then along the way, slowly, painfully, there will develop a deeper union of up to 26 states – without Britain.

Cameron's "no" is not just a fateful moment for these islands. It's a bad moment for Europe. Britain's ambivalence about Europe is centuries old. Writing in 1937, and looking back as far as 1789, the historian RW Seton-Watson wrote: "The desire for isolation, the knowledge that it is impossible – these are the two poles between which the needle of the British compass continues to waver." Plus ça change …

Having stood aside in the 1950s, as France, Germany, Italy and the Benelux countries started to form a European community, Britain decided it had to be present "at the top table" to defend its own interests, traditionally understood to include preserving the balance of power on the continent. For nearly 40 years, even under Margaret Thatcher, that is what British governments have tried to do inside what is now the European Union.

But this year, in a little-noticed sea change in British European policy, Cameron yielded to the brayings of his own Eurosceptic backbenches and said something new: you, dear friends in the eurozone, go ahead to save it. We will stand aside, applauding from the sidelines. Napoleon, bonne chance! This is not the "Very well, alone" of the British soldier in David Low's famous 1940 cartoon – for that soldier was fighting for a better future in Europe as a whole. It is a quite different "Very well, alone": leave us to be an offshore Switzerland. When a Tory Eurosceptic MP called Mark Reckless was asked on the BBC's Today programme whether yesterday's veto made us "a bit like Switzerland" he said yes – and a good thing too. Reckless, indeed.

Cameron argues that he has defended Britain's national interests. In the short term, on the narrow point of regulating financial services, perhaps he has; in the long run, emphatically not. Whatever the legal small print says, if things go on like this Britain will lose influence, even over the rules of the single market. A child of five can see that. If you have a club in which 25 or 26 members want to go one way, and one or two want to go other ways, who will prevail? Especially if the 25 or 26 have set up their own club-within-the-club.

This is bad for Britain, but also for Europe. Switzerland is one thing, Britain quite another. It does Europe no good at all to have one its largest economies – and the home of its leading financial centre – stand aside. With two parallel structures in an already labyrinthine European Union, there will be endless wrangles about who is entitled to do what. There can be no credible European foreign and security policy without Britain. In the eyes of China and America, Europe will be weakened. A big day for Europe, then, but no cause for celebration.