A total of 12bn euros will be set aside to recapitalise the banks.

The most crucial detail missing is the interest rate that the IMF and EU will impose. The Republic of Ireland, among others, will be watching closely. That is likely to be set when Europe's finance ministers meet on 16 May.

Nor has it been revealed what reforms will be required. According to reports from Portugal, caretaker Prime Minister Jose Socrates has said there will be no cuts in public sector wages or the minimum wage. The most significant change may well be with structural reforms, shaking up a rigid and archaic system for hiring and firing.

There are other unknowns. Portugal's political parties, who are in the midst of an election, have yet to approve the plan, but they are expected to sign off on the agreement. However, if the reforms are seen as too severe Portugal's unions may take to the streets.

Finland's parliament may still put some obstacles in the road, after its voters registered strong resistance to financing bail-outs.

But the biggest question is the same one that remains unanswered with Greece and Ireland. A Portuguese official says the economy is likely to contract 2% in 2011 and in 2012. So when the loan period ends how will Portugal have reduced its overall debt?

Where will the growth come from that over the long term will take Portugal off the endangered list? While that question remains unanswered the talk of restructuring debt will not disappear.

The bail-out plan envisages 5.3bn euros in revenues from privatisations. Greece too is looking to raise a large tranche of money from privatisations. They have not yet happened and very much remain on the to-do list.

Interestingly the target for reducing the deficit this year is 5.9% of GDP. That is slightly easier than the current plan.

One questioner asked the French president why it was right to intervene in Libya and not elsewhere. He replied that nowhere else in the Arab upheaval was the army turning its firepower on its own citizens.

I was reminded of this when I saw the picture of a T-72 tank heading into the Syrian town of Deraa. It could be that Bashar al-Assad will prove as brutal and ruthless as Colonel Muammar Gaddafi.

Getting international agreement to squeeze the Syrian leader may well prove much harder than against the Libyan leader. There was a foretaste of that at the UN yesterday when Britain, France, Germany and Portugal failed to win support for a statement condemning the violence.

Tomorrow the EU's political and security committee will discuss further measures. The German government, for one, strongly supports sanctions. Washington is working on sanctions which will target Assad, his family and the inner circle that effectively runs the country.

Turkey is pivotal. It has forged a strong relationship with Syria. It has urged Damascus to back reform and has even offered economic assistance in sharp contrast to Europeans edging towards sanctions.

But applying pressure on the regime has proved a slow burn.

Firstly, the West had invested hope in President Assad. He was seen as a more flexible leader than his icily ruthless father. For a while Western governments had given him the benefit of the doubt that - in the face of protest - he would support reform. Up until a few days ago UK Foreign Secretary William Hague was saying: "It is not too late for him [Assad] to say he is really going to do these reforms.'

Secondly, there is debate as to the extent to which Assad himself is running the country or whether some of the security officials who served his father are still the power behind the throne.

Thirdly, military action is not seen as an option even by those who have been most robust over Libya. Senator John McCain, for example, sounded distinctly lukewarm about the military option.

The main reason is that Syria is pivotal in the Middle East. The allies of Damascus have the ability to destabilise the region. The Americans believe that Assad could appeal to Iran for assistance. And Hezbollah - another ally - could undermine the fragile peace in Lebanon or threaten Israel. Interestingly, at the UN Lebanon was one of the countries that refused to condemn Syria.

So the slow march towards sanctions. But Damascus has far more allies than Gaddafi. What European countries and others are watching most closely is whether splits are opening up within the ruling Baath party and within the military where the officers tend to be Alawites and the troops Sunni Muslims.

A few days ago President Sarkozy spoke about Syria. The tone was very different to Libya. "We are not going to intervene everywhere in the world," he said,
"and not all situations are necessarily the same." Over Syria outrage is tempered by caution and realpolitik.

On one level this can be seen as a practical question over how to handle what are principally economic migrants. But on another level this crisis goes to the core of what the EU is about and whether some of its fundamental principles are in touch with the mood of the people.

The migrants from Tunisia have arrived in Europe at a time of economic insecurity. In Italy youth unemployment is running at 25%. Across the EU, 24 million are without work and so far, with the exception of a few countries like Germany, it has proved a jobless recovery.

From the start the Italian government set out to make this a European problem. One of the parties in the governing coalition, the Northern League, is fiercely anti-immigration. So the Italian government issued the migrants with temporary visas, knowing only too well that with no border checks a majority of them would head to France. The Schengen agreement, signed in 1985, created open borders among 25 countries. The UK and Republic of Ireland did not sign.

The French saw the Italian move as cynical. They responded by stepping up border patrols and briefly stopped trains running between the two countries. The Italians were outraged. They accused France of violating one of the basic EU agreements. Then on 22 April the Elysee Palace hinted at a "suspension" of the Schengen agreement. Later that was qualified to mean reviewing some of the exemption clauses. The French say Europe is not about the free movement of illegal migrants.

All of this has led to fierce arguments. In France, Harlem Desir of the Socialist Party said "Sarkozy and Berlusconi make Europe ashamed. They are behaving in an absolutely unworthy fashion. France should, on the contrary, be at the forefront of a co-ordinated European response. It would be a fatal error to abandon the common Schengen policy."

The mere hint that the Schengen agreement might be suspended sent shockwaves through the European establishment. For it was not just France that did not want to take the migrants. Germany, Belgium, the Netherlands were all complaining about the Italian action.

In Brussels the Schengen agreement is regarded as one of the cornerstones of the European project. The euro is the other. All of this touches a raw nerve. The EU Commission hurriedly said that Schengen can't be suspended "temporarily" although it did give some support to the French action. With the euro crisis far from settled and with bail-outs increasingly unpopular it has led some like Markus Ferber, an MEP for the conservative German CSU, to say that solidarity among European countries is waning.

The Italian tactic has been to make this an EU crisis. The Italian Foreign Minister, Franco Frattini, said that Schengen "which is one of the two pillars of Europe along with the euro" cannot be questioned. The Italian strategy is to present this as a challenge to EU basic principles and, like with the euro, to force countries to construct a European solution.

Italian and French security officials have met in Milan. They agreed on joint sea and air patrols in the Mediterranean - but that is the easy part. The real question is what to do with the migrants. In the long term Europe may be able to use financial incentives to get the Tunisians to patrol their borders. But that is down the road.

Already about 400 of the migrants have reached Paris and reports suggest that dozens are arriving each day in the suburb of Seine-Saint-Denis.

The French and Italian leaders are each under pressure. They may agree on a joint appeal to review Schengen, to clarify how the agreement applies to the movement of significant numbers of people. But their interests differ. The Italians want the review to get others to "burden-share" ; the French want to keep the migrants out.

The real tension here is that EU principles are increasingly seen as at odds with economic reality and the wishes of a majority of the people. Appeals to solidarity do not sit well with the voters. The dilemma is similar to that of the bail-outs. In order to keep the euro together Brussels is supporting policies that alienate many voters.

The True Finns are an anti-immigration party, wary of the influence of Brussels. A measure of their rise is that at the last election they secured just 4% of the vote. Yesterday they got 19%, which put them in third place. They expect to be invited to talks about joining a coalition.

Unlike other countries in the eurozone, Finland's parliament has the right to vote on EU requests to bail-out other countries. Potentially the strong showing of the True Finns could delay the rescue plan for Portugal.

"This is a big, big bang in Finish politics," Jan Sundberg, a professor from Helsinki University, says. "This is a big, big change."

The leader of the True Finns, Timo Soini, said he did not believe that the terms of the bailout package would remain. "Its a bad deal," he said after the count. His aim was for Finland to "pay less to Brussels". Another party, the Social Democrats, which is also critical of a bailout deal, came in second place.

During the campaign the main party in government - the Centre Party - had warned that Finland had to act responsibly to prevent a crisis in the eurozone. Its pleas went unheeded. It was the biggest loser on the night, left struggling in fourth place. Yes, it had been hurt by a funding scandal - but it was a resounding defeat.

A few years ago the True Finns were a fringe party, that received almost no attention. So what happened? The vote was not just about the bailout. There was anxiety about unemployment and fears of a jobless economic recovery. Reductions in pensions had angered many workers. The party also tapped into fears about immigration.

What makes this election so significant is that it follows a pattern across Europe. Establishment and incumbent parties are being rejected. Nationalist parties are gaining influence.

In the Netherlands, the anti-Islam MP Geert Wilders leads the country's third largest party. In Italy the Northern League - hostile to immigration and wary of the EU - is increasingly powerful. In France, Marine Le Pen - who wants to abandon the euro - is showing strong support in the polls.

Recently, writing in the Financial Times, Peter Spiegel questioned whether we were seeing the emergence of a European Tea Party. Certainly there is a strong sense of alienation and dissatisfaction. Immigration is a key factor. It is shaking governments. There are more than 24 million people without work in the EU and there is no appetite to welcome new arrivals. That is why the migrants from Tunisia are sparking such tension between Italy and France.

As important as immigration is unemployment. In countries like Italy and Spain there is talk of a "lost generation" that cannot find work. There is a growing awareness that Europe may be a low-growth area.

And that feeds into the growing anger towards the bailouts. In Finland, the True Finns appealed to a sense of injustice; that the "squanderers" were being rescued.
And then in countries like Greece and Ireland, voters see the years of austerity stretching ahead. Neither the bankrollers nor the bailed-out are happy.

The temptation in Brussels will be to dismiss the True Finns as populists and to ignore them. It would be more interesting to focus on what is stirring up the European grass-roots. The challenge for Europe's leaders is to listen to what is being said on the streets.

(Interestingly there is a fierce argument developing over whether the bail-out medicine is working. As I reported last week, voices are increasingly urging a re-structuring of Greek debt. Both the President of the European Council, Herman Van Rompuy, and the French Finance Minister Christine Lagarde used the same word to dismiss such talk. Re-structuring would be "catastrophic". It's not on the table, one of them said. And yet clearly it is. It is being discussed everywhere. Why? Because no one can see how the bailed out countries can grow to the point they can pay down their debts)

So what will happen in Finland? Long negotiations to find a governing coalition. The man most likely to be prime minister is Jyrki Katainen. He went out of his way to play down Finland standing up to Brussels. "Finland," he said, "has always been a responsible problem solver... this is about a common European cause." In many different ways the pressure will be on Finland and the True Finns to compromise.

But, politically, Europe is restive, unsettled, anxious and increasingly losing patience with the elites and the parties in power.

The intervention in Libya is 27 days and counting. The first doubts and tensions are emerging. There are signs of frustration. The British and French in particular are turning the heat up on Nato.

It surfaces as a cliche, but General Moltke's dictum holds true: "no battle plan survives contact with the enemy".

The German Foreign Minister, Guido Westerwelle, has questioned the whole basis of the campaign by saying there can be "no military solution" to the Libyan crisis.

In the UK the poll numbers supporting the intervention have edged down, but only slightly. In France support at 63% remains healthy. Jean-Francois Cope, leader of President Sarkozy's ruling UMP, said the arguments in favour of action appealed to how France sees itself and what it stands for. "(It's) what we call the values of the republic - the capacity for us to refuse... what is unacceptable," he told me.

But even in France, which unusually finds itself playing the lead role, there is a fear of stalemate. In America the cry would go up "where is the exit strategy?" In the cafes of Paris, where the new interventionist republic is much discussed, the talk is of deadlock on the ground leading to weariness and acceptance of a messy compromise.

Dominique Moisi, of the French Institute for International Relations, told me that "the French are very worried that another country like Turkey could come in and say 'I have a solution - there is a stalemate, I have a solution that will bring a permanent ceasefire on the ground'." And such a ceasefire could leave Libya's Muammar Gaddafi in place.

For the allies that outcome would be a failure. They have said too often that there is no future for him in Libya. So even if he were to withdraw his armour, pull back from disputed towns, restore basic facilities, it would not be enough. Yes, almost certainly lives would have been saved in Benghazi and elsewhere, but it would be mission not accomplished.

The French and British leaders dining at the Elysee last night know this. Time is not their friend. Alliances tend to fracture. Voters grow weary, even without casualties.

The central problem of the campaign, as Gen Moltke knew, is that the enemy adjusts. The Libyans have torn a page out of the Slobodan Milosevic book of defence. Gaddafi's armour is now camouflaged and hidden in the side streets of cities. His forces play cat-and-mouse with the eyes in the sky. Nato sorties are flown, but often return with the munitions still attached to the wings.

And this is where the role of the Americans comes in. President Obama was a reluctant interventionist. He genuinely wanted the Pentagon, on this occasion, to take a back seat. He was also sending a message to the Europeans: it's your patch, you lead.

So after the initial strikes - designed to destroy Libya's air defence system - command was passed to Nato and, in reality, the big two - France and Britain. The Americans have continued to fly missions, but against radar sites. It's what the Americans call defensive missions. What they haven't been doing is going after Gaddafi's tanks and armoured personnel carriers. That is left mainly to the Europeans. The rebels don't like this. They say Nato is too slow to react. They also want the much-feared American close-support planes, the A10 tankbuster and Spectre gunships, that can be so devastating against ground forces.

Some in Paris and London would favour the Americans re-engaging but, for the moment, that won't happen. If there is a strategy for success it is this: to intensify the air campaign.

The plan goes like this: there must be no easing back, no perception of running out of options. For this has become a battle for Gaddafi's mind. He has to see that defeat is inevitable. Pressure has to mount of him day by day. The coalition has to send a message: "we will outlast you". Momentum has to be seen to be with Nato and the rebels. I'm hearing from colleagues in Tripoli that that point has not been reached. The regime still believes Nato will tire.

So the cry is for more planes, more intensity from the Europeans. That is on the agenda at a meeting of Nato foreign ministers in Berlin today.

But if the turning of the screw fails then there are the first signs of mission creep. The Italians and Qataris want to arm the rebels. Belgium is not alone in expressing doubts about whether this is covered by the existing UN resolution.

The UK is not sending weapons but it is digging out 1,000 suits of body armour from the stores. Non-lethal aid, communications equipment, trainers on the ground. In the past - and in other theatres - it was a well-worn path that led to boots on the ground.

For the moment the coalition has time. President Sarkozy is under no pressure. The public approves of Sarko the interventionist. French planes over Libya. French special forces tipping the balance in Ivory Coast.

But operations abroad may not translate into popularity at home. As Dominic Moisi said to me yesterday, foreign operations rarely win elections. Bill Clinton was surely right when he said "it's the economy, stupid". President Bush senior was shown the door after victory in Gulf War One. Winston Churchill famously received no gratitude from voters determined to build a different post-war world.

But a stalemate? That could be damaging. The charge would surely surface that the president had rushed into an unwinnable war.

So for the moment the only plan is to intensify, to step up, to keep piling on the pressure and to hope the "mad dog", as the Americans called him, accepts the inevitable.

Some of those European finance ministers have told me they feared they might lose the euro that night. They were still arguing when the skies were lightening in the Asian east with traders preparing to dump on the single currency. But like in the dying moments of a poker game there was one more hand to be played: Germany agreed to place a heavy stash on the table and Greece was bailed out.

So began a journey that has not ended. Greece was put on a life-support machine, sheltered from the markets. But the bankrollers were angry. Greece had faked its accounts. So there would be a penalty. Austerity. The Greek government accepted it would have to take the axe to a bloated public sector.

But as Europe stands on the threshold of this anniversary there is a growing belief that the bail-out has failed. It has bought time. Nothing more. Greece was heading for bankruptcy a year ago. It still is. It got a reprieve with a debt mountain that was about 300bn euros. It is higher now. The debt-to-GDP ratio is over 140% and heading towards 158%.

The Greek government, to be fair, embarked on a cultural revolution. The world of early retirement, holiday payments and tax evasion would be cleaned up. Over time the reforming zeal has faded. Austerity has reached its limits.

In a country that relies heavily on public spending the squeeze has dampened demand. Greece cannot escape the debt trap. The tighter the squeeze the more the economy contracts and the greater the debts pile up. GDP will shrink this year by 3%. Unemployment heads towards 14%.

Hans-Werner Sinn, the head of the IFO German think-tank, says "it is obvious Greece is insolvent". He and a significant number of economists believe that a restructuring of Greek debt is coming. It is the truth that dare not speak its name in Brussels. As Mr Sinn puts it, "we need to put the debt on the table and free this country a little bit from the overwhelming debt burden".

The Greek government has set its face against restructuring. It would be the first by a Western European state in about 60 years.The Prime Minister, George Papandreou, warns darkly that it would be catastrophic for banks and pension funds holding Greek debt.

Yet the mood in Athens is changing. The people are done with austerity. Even members of the governing Pasok party are beginning to contemplate the "r" word. The head of the parliament's economic affairs committee, Vasso Papandreou, said "it's better to have a restructuring now, not necessarily haircuts (for bondholders), but perhaps a repayment extension, since the situation is going nowhere". That is the dawning realisation that Greece is locked in a vicious cycle.

So why not go for a restructuring? Why shouldn't those banks in Germany and France take a hit? The fear is that those banks - particularly in Germany - remain fragile. A Greek default could usher in a wider banking crisis.

The President of the European Council, Herman Van Rompuy, is in Greece today. His mood appears surprisingly chipper. "The threat of the (eurozone) crisis spreading has been reduced significantly, or disappeared," he declared. Van Rompuy knows his economics, but he won't be surprised to know that others disagree with his prognosis. Like other European officials, he shuts the door to the idea of restructuring. He believes the reforms should be given time until they start to bring results.

"It can be done," he says. "I know it from first-hand experience as budget minister in Belgium, when we managed to cut public debt from 130% of GDP in 1995 to 114% in 1999."

Sure it can be done, but there is no evidence of it happening in Greece. Over the past year the central government deficit actually widened to 7.8%. The deficit is being revised upwards. Tax revenues are declining. Indeed in Budapest last week, at a meeting of European finance ministers, Greece was given a warning: don't back off reforms.

Yesterday the IMF said icily that the programmes of support (for countries like Greece, the Republic of Ireland and Portugal), were based on assumption that "they would honour their guarantees".

We are reaching a point when the Greek people may not take further austerity. The past year has been marked by strikes. Everyone - or so it often seems - from truckers to journalists has at some stage or other walked out. They don't want the medicine enforced from Brussels or the IMF. There is a low-level of disobedience against paying toll charges. The government, casting around for revenue, may be about to slap a tax on fizzy drinks.

But a year on the argument is shifting, and moving towards some kind of restructuring.

For from today the wearing of full-face veils in France is banned. Overnight the woman from the suburb has become a dissenter. She says no law should tell her what she can't wear. She also believes that her faith trumps French law, and therein lies her problem in an avowedly secular French Republic.

Failure to obey the law could lead to a 150-euro (£133, $217) fine and being sent to citizenship classes. A criminal record might follow.

Perhaps, most significantly, anyone found forcing a woman to cover her face risks a 30,000-euro fine.

The burka or niqab is worn by very few in France - perhaps 2,000 women. The Muslim population is estimated at five million. Today - most probably - a few women will be defiant. Protesters against the new law are set to gather close to the flying buttresses of Notre Dame cathedral.

The police have orders to be restrained and respectful. The niqab-wearers, if any show up, will probably today be handed a leaflet. The authorities have printed 400,000 with the message that "the Republic lives with its face uncovered". A few women will see themselves as martyrs for a cause and already have their eye on the European Court of Human Rights. A businessman has offered to pick up any fines.

This law is about putting down a marker. As I have written before, many European leaders now believe that multiculturalism can lead to parallel, segregated communities. A new emphasis is being placed on minority communities integrating into the society they join, rather than just living as they did before. So Western societies are becoming more assertive about the values they uphold and the ones they expect others to respect.

Jean-Francois Cope, the French MP who has taken a lead over the burka ban, argues that seeing someone's face is key to human beings understanding each other. He sees the law as a step against separation.

The Muslim community is divided. It is made up of many voices and many views. Some believe it is important to become part of modern France. Some support the ban. Some don't. Some Muslim women wear headscarves. Many don't. Some believe that the Koran calls for a woman's face to be covered. Others say that such teachings appear in the works of scholars, not the Koran itself. There are Muslim women running companies; there are those discouraged from leaving their houses. Some wear dark headscarves, some are brightly coloured. A few hide their faces, while others are comfortable with heavy eye-liner and bright lipstick.

Ultimately this is an argument between those who believe that living in France demands that you sign up to certain French values and those who say that tolerance should allow you to dress how you want and to respect religious diversity.

The law is likely to be largely symbolic. There will be few prosecutions and it will be difficult to prove that a woman is being forced to wear a niqab because of her husband or family. Over time some women will choose not to wear it. Some shops stocking the niqab already say they will discontinue stocking it.

I suspect that this ban will generate a vibrant debate between Muslims. There are indications it has started already. Some say that the full-face veil is not a religious statement. It is purely cultural. Others say that it belongs to a strand of Islam. Others say that the wearing of headscarves is about asserting identity in a Western Europe that can still be frosty towards outsiders. Within traditional families there are daily arguments about how to live in a society that offers so much choice. Freedom can split families, as it has done with other religions.

What the French authorities want to avoid, at all costs, is a confrontation which could turn a debate about the covering of faces into whether the Muslim community is being singled out for special treatment.

There are, however, layers of anxiety - the young woman worried because her job is dependent on public funding, another who wants to start a family but sees a bleak future. There's the politician who says this is one of the worst moments in Portugal's history and an older woman, on a tram, who told us it was a humiliation. And then the by now familiar European story - a younger generation desperate for work and planning their getaways.

The prime minister had said he would not resort to the begging bowl. The Portuguese banks, when they ceased buying up the country's debt, ensured defeat. What is left now is to negotiate the terms of surrender.

What we learnt today is that the bail-out will be around £70bn ($114bn; 79bn euros). It will come with strict conditions - deeper cuts to the budget, privatisations and reforms to the labour market. We should get the details by mid-May.

Until early June, Portugal is in limbo, without a government. The election will turn on the question of who brought Portugal to the verge of bankruptcy?

Almost certainly only a newly elected government can finally sign off on the terms of the bail-out. Because of the political uncertainty, the EU has insisted that all the major parties agree to the terms of the bail-out.

Soon the men and women in suits - technical mandarins who will pore over the accounts - will descend on Lisbon. Only then will some of the key details emerge - what will the interest rate be? What will be the repayment period? And, perhaps most crucially of all, what further spending cuts and tax increases will be demanded? How extensive will be the structural changes required in order - hopefully - to re-engineer a chronically uncompetitive economy?

Public sector workers have grown increasingly restless, increasingly opposed to the raft of spending cuts and tax increases. VAT has gone up. There have been new taxes on some pensions. Wages have been trimmed. Money for local councils and health and education has been pruned.

More is surely to follow. The federation of public sector unions has already called a strike for early May.

Across Europe, the mood is turning against austerity. The central question remains unanswered - is the medicine working? In Greece, tax revenues are actually falling. Ireland has been forced to pump another 24bn euros into its banks. The European Central Bank has ruled out burning investors so Irish taxpayers shoulder the burden and lean years stretch ahead.

Portugal is in the midst of a double-dip recession. And therein lies the conundrum. How will these economies grow to the moment they can escape their debt trap?

That is why many economists believe that, sooner or later, debt restructuring will follow. Across the EU, opposition parties are likely to say the years of austerity are a very high price to pay to defend the euro. For it is the European institutions who insist that investors should not take a hit because they fear the ripples that would flow through the banking system.

Spain's Finance Minister Elena Salgado, who has negotiated her country's path with some skill, declared yesterday that Spain would be the last euro-zone country to need a bail-out. You wouldn't want to put your money on it. Growth in Spain is barely spluttering and unemployment is actually increasing. There are doubts too over Italy's finances.

Meanwhile, the European Central Bank has edged up interest rates. As it was in the beginning so it continues. At the birth of the euro-zone the rate was right for some countries but not others. The chief economist at MKM partners said: "The ultimate effect is that [the interest rate rise] will restrain inflation in Germany and France but will cause deflation in the periphery which will cause austerity programmes to fail."

That is the doubt that informs the main political debate.

Could the treatment the EU has chosen to defend the euro - namely austerity in exchange for loans - fail? And, if it does, what then? There is increasing tension - as I have written in other posts - between the bankrollers (voters in Germany, Finland and Holland) and the bailed-out (voters in Greece, Ireland and Portugal) who increasingly resent the EU and their loss of independence.

In Britain, too, the public seems overwhelmingly against offering loan guarantees to Portugal. The UK potentially will have to contribute about £4bn but the chancellor says many hurdles would have to be jumped before he would be signing any cheques.

The government insists its hands were tied by commitments made by the former chancellor in the dying days of the Labour government. Alistair Darling says he consulted incoming ministers. The chancellor also made it clear today that he would not challenge the use of the EU's emergency fund to bail-out Portugal. He sent a clear signal to some of his back-benchers that he was not about to open up a major row with Europe.

So far this bail-out has been calmer than the others but the road ahead is littered with risks and dangers.

Portugal suffers from low growth and an uncompetitive economy. It has also run up a dangerously high deficit.

The government in Lisbon had been sluggish in embracing labour market reforms and making cuts. The austerity programmes really only kicked in in January.

Meanwhile the harsh gaze of the bond markets fell upon Portugal and the traders were unconvinced. So the cost of borrowing shot up to a level that was all but unsustainable. The country would have struggled to raise the funds it needed - certainly by June.

As the government hurried to cut spending and raise taxes the mood of the country changed. There were demonstrations against austerity.

Then the week before last the Portuguese parliament took a step that sent shockwaves through the eurozone. It rejected a series of measures that had essentially been drawn up by the European Central Bank and the European Union. The government fell. The Germans, and others, demanded that Lisbon should remain committed to cutting its deficit and restoring competitiveness to its economy.

The EU's bail-out funds are certainly sufficient to help Portugal. A conservative estimate is that it will need 75bn euros (£66bn). A more difficult negotiation will be the terms of the deal.

So far the bail-outs of Greece and the Republic of Ireland have failed to draw a line under the crisis. They have protected both countries from the markets, but they have not addressed the longer term problem. How will these countries - facing a severe financial squeeze - find the growth and the funds to sort out their debts in the long term?

Portugal will be in the same position. The gap between it and countries like Germany is widening. Its economy is predicted to shrink this year by 1.4%.

Any bail-out that includes the International Monetary Fund will be extremely unpopular in Portugal. There are bitter memories of the past, when the IMF dished out some bitter medicine. The Portuguese people have indicated they are opposed to the current spending cuts. Will they accept further austerity? Where will growth come from?

All of this lies ahead. The ECB may well today raise interest rates, making conditions harsher for Greece, Ireland and Portugal.

Many believe that - despite these bail-outs - some kind of restructuring of debt is inevitable. The determination to prevent that at almost any cost is sowing real division within the eurozone. Watch how the electorate votes in Finland on 17 April. One key factor in the campaign is resistance to rescuing weaker eurozone members.

In Portugal once again it was the banks who cried out for help. They wanted a bridging loan and a rescue became inevitable. Increasingly the mood in Europe is to let banks and other senior bondholders take a hit, rather than the taxpayer.

The crisis in the eurozone is much more than about what rescue fund will be tapped, or whether there are mechanisms to prevent similar crises in future. The heart of the problem is that Europe has become, in part, a low-growth area. There are deep divisions within the eurozone. Countries that use a single currency are vastly different in economic performance.

The price of saving the euro is years of austerity for the weaker eurozone countries. It is those stresses that will be worth watching in the weeks ahead.

Will the pressure now move to Spain and beyond? Not necessarily. Spain has taken convincing steps to reduce its deficit and open up its economy. But its unemployment rate of over 20% is growing. Demand is weak. If Spain was to need a rescue it would shake the eurozone and raise questions about its long-term survival.

Later today the trial begins of the Italian Prime Minister, Silvio Berlusconi. It will receive worldwide attention. Italian papers and news channels will devote huge space to it.

Many Italians are ashamed by this, but others admire him: self-made, defiant, with an uncanny instinct for what matters to ordinary Italians.

It is almost certainly true that in no other major democracy would a leader survive this: the severity of the accusations about sex with minors, the housing of party girls, the friends who are accused of being procurers and of women being delivered like "parcels".

It is a trial that risks becoming a show. Some witnesses may embrace the chance of a publicity shot, with the court steps a catwalk of notoriety. The evidence too may descend into a sleazy plot of women encouraged to dress as nurses and police officers, of sex acts in the bunga bunga basement, all featuring "veline" - wannabes, reality show contestants and the vulnerable.

Berlusconi may strangely relish the challenge. Maria Latella knows him well and has written about him. She says all his persuasive powers will be directed less at the judges or the press but at the Italian people. He always believes he can win people over.

Many doubt the trial will bring him down. There will be frequent delays and his lawyers, at every stage, will challenge the court's jurisdiction. His battle for survival will intrude on Italian politics; parliamentary time will be consumed as he seeks immunity and questions whether the court in Milan has the authority to judge him.

His poll ratings are down to 30%. But that compares well with other leaders who are not facing such serious allegations. In a divided land, with no convincing alternative leader, he could yet survive.

A few months ago I found that many believed that if elections were held he would still emerge as winner. That now appears less certain. He could survive the trial, but it is less likely he would win another election.

Internationally he is sidelined. There are stories of other world leaders declining to be photographed with him. When he turned up at a recent summit in Paris, which launched attacks on Gaddafi's forces, his arrival was met with laughter by the large gathering or reporters.

Berlusconi will not be troubled by the media. He appears unmoved, certain of his ability to out-fox anyone and beat the system.

Meanwhile Tornados fly from Italian bases, the great Arab awakening the other side of the Mediterranean is fragile, the zealots grow in confidence, boats are landing thousands of migrants on Italian shores, demonstrations are planned over Italy's unemployed and the crisis in the eurozone lies dangerously unresolved - and Silvio Berlusconi, facing four trials, remains Italy's prime minister.

Tomorrow Jean-Francois Cope, a rising star in the governing UMP party, will hold a debate on secularism and Islam. Its purpose will be to explore how to accommodate Islamic customs with France's secular traditions.

The very idea of the debate has sparked argument. Some Muslims say it will stigmatise them. A former diversity adviser to President Sarkozy has not only stood down but is calling for demonstrations against the debate. He says the UMP party is a "plague on Muslims".

Even within the ruling party there is division. Prime Minister Francois Fillon and Foreign Minister Alain Juppe don't like or want this debate.

Various religious groups have issued a statement saying they fear "the debate could add to the confusion in the troubled period we are traversing."

And yet, according to polls, the French are deeply troubled about how some Muslims behave in France. One poll suggests that 40% of people regard Islam as the enemy within.

Some see the debate as pandering to these fears, while others insist it is a discussion that must be had.

The whole subject is fraught with complexity. A 1905 law that separates Church and State is a central tenet of the French Republic. It underpins important French values.

President Sarkozy believes that if halal food, for instance, is served in a secular school canteen then that crucial separation between Church and State is compromised. Others argue that allowing Muslims to pray on the streets encourages religion to seep from the Mosque into the public space. Others say that parents banning girls from joining in mixed swimming sessions introduces religion into a secular activity.

And so the arguments flow.

Jean-Francois Cope suspects that many activities are less connected with religion and more with political Islam. "There are a certain number of extreme behaviours," he said, "led by fundamentalists who are using the religion for political ends and use extremist techniques."

And this touches on wider questions. It is widely accepted that it is fundamental to democratic society that all are equal under the law. All must obey it. That, in itself, guarantees religious freedom.

And yet in France - and elsewhere in Europe - there are those who say that some Muslim communities are arguing that they are a special case. A few influential figures have even argued there may be a case for allowing some form of Sharia law.

Only this weekend, in an interview with the Times, the ethnic Somali writer and former Islamist Ayaan Hirsi Ali said that "a society needs the rule of law. Islam is incompatible with the rule of law because it says only Allah is the law and not human beings."

There will be many Muslims who would challenge those views, but again behind the argument is a fear that separate, segregated communities will emerge, rather than integrated communities.

So to the question: Should all this be debated or not? If the discussions are not had there are others who will embrace it. That is for sure. Marine Le Pen, who leads the National Front, has made it a key plank of her campaign that religion should be kept out of the public space. Her stand on this partly reflects her current robust standing in
national polls.

Then next week the French ban on the burka and the niqab comes into effect. There will be a warning initially, followed by a 150-euro (£132; $214) fine. Any man found guilty of forcing a women to wear a burka will face a 30,000-euro fine.That may prove the more significant part of the legislation.

No one knows how seriously this will be enforced or what impact it will have on the few thousand women at most who cover their faces.

But besides this debate in France it is happening elsewhere - sometimes in the headlines and more often out of view. The sense that multiculturalism has failed has gone mainstream. It is a view espoused by Angela Merkel, Nicolas Sarkozy and David Cameron. Multiculturalism was supposed to lead to integration. In many cases, they argue, it has led to division.

Fundamentally these arguments are about the proper place in a free society of religion and citizenship, and which takes priority.

It has become a hugely ambitious country, bristling with self-belief. In a turbulent Middle East it believes it is the democratic role model. It eyes the role as spokesman for the region as a whole. When disputes need to be settled, it offers itself as the mediator. The State Minister and Deputy Prime Minister Cemil Cicek summed it up: "Everybody has to see Turkey's power."

Over Libya it is the country that the West watches more carefully than any other. For the moment, Turkey is supporting Nato's campaign whilst refraining from joining in any attacks on Gaddafi's ground forces. It is holding itself back, ready to step forward as the indispensable locator when the hour of negotiation approaches.

On the Libyan conflict it has flipped and flopped however. Early on, the Turkish Prime Minister Recep Tayyip Erdogan denounced any Western intervention as "absurd". He raised fears of a "second Iraq". Turkish officials seemed to lash out at what they portrayed as an oil grab by the West. They picked a fight with the French interior minister Claude Gueant who unwisely said the French President was leading a "crusade" to stop Gaddafi's barbarism. He didn't mean it of course in the historical sense but Turkish officials pounced on the tongue-slip.

That was then. Now Turkey is committing five or six vessels to police the arms embargo and is running Benghazi airport to co-ordinate humanitarian assistance.

Turkey wanted to disguise its hand, to see which way the battle flowed. Twenty thousand of its citizens work in Libya and it has lucrative contracts there. Commercial self-interest made it cautious.

The u-turn was driven by the realisation that the international community, including the Arab League, was determined that the killing of civilians had to stop.

Turkey had two positions. Firstly, it would not attack Gaddafi's forces directly. Secondly, it was fiercely opposed to a coalition, led by France, setting the agenda.

Its problem with France is simple. President Sarkozy is against Turkey joining the EU as a full member. Ankara feels insulted and it is easy to meet Turkish officials with a mouthful of rage against the French president.

So Turkey wanted the operation run under Nato, where it has a role in decision-making and drafting the rules of engagement. Its position is hard-headed. "We are one of the very few countries that is speaking to both sides," said one official. It waits for that moment when the mediator is summoned on to the field of play.

On the turmoil in the Arab world, Turkey has sold itself as the role-model. Early on it urged Hosni Mubarak to stand down. Many of the Egyptian demonstrators wanted Egypt to be like Turkey; secular yet certain of its Muslim identity but with free elections.

When the killings started in Syria, Prime Minister Erdogan was immediately on the phone. "I have made two calls to President Assad in the last three days and I have sent top intelligence official to Syria. I have called for a reformist approach."

It is all skilfully balanced; on the side of reform but keeping a hand in with the man in power.

Sometimes it seems Turkish officials are everywhere. Such as when the prime minister shows up in Baghdad. It is Turkish goods and companies that so far have conquered Iraq's markets. With the prime minister were 200 businessmen.

President Ahmadinejad of Iran may be isolated, but not with Turkey. Ankara has again positioned itself as the deal-maker. There is also the not-so-small matter of $10 billion in trade with Tehran.

Turkey has also helped shine its credentials in the Middle East with a major row with Israel over the interception of a boat heading for Gaza. Turkish citizens died in the incident.

So Turkey's sphere of influence widens but, even so, there are the problems.

Since 2005 it has been engaged in accession talks with the EU. For the moment they are going nowhere. President Sarkozy and Chancellor Merkel favour instead of membership "a privileged partnership". Turkey wants none of it and seethes with resentment.

Some - but not all - in the EU are wary. There are 24 million without work in Europe and the appetite for enlargement has dimmed. Not everyone is convinced that a Muslim country should be in the EU. It would be difficult to have Turkey join without its people being consulted.

Turkey knows this and asks the searching question: "Is the EU a Christian Club or is it the address of a community of civilisations? The current picture shows the EU is a Christian Club. This must be overcome." It touches a raw nerve. But plenty in Europe ask whether Turkey would accept becoming a community of civilisations.

You could sense the strains and tensions when recently Prime Minister Erdogan went to Germany, where two million people of Turkish origin live. He caused huge offence when he told an audience in Dusseldorf: "Our children must learn German but they must learn Turkish first." It was an open challenge to the German government which had been insisting that those who live in Germany must speak the language and integrate. The German chancellor opined that multiculturalism had failed because it led to separation.

There is, too, friction over Cyprus, and the disturbing detentions of reporters and writers. It forced the European Commission to warn Turkey over its democratic credibility.

And then there are the doubts as to how committed the ruling party is to secularism. Recently Ayse Sucu, who headed a woman's group, was squeezed out after suggesting women themselves should decide whether to cover their hair.

There is an ongoing struggle within Turkey which will demonstrate its commitment to tolerance. That, more than anything, will determine whether it is indeed a role model.

But Turkey is on a roll. Sometimes - irritated at being rebuffed - it contemplates abandoning its pursuit of EU membership. It survived the economic downturn and its growth is an enviable 5%. It may prefer to go it alone and, like the Ottomans, revel in newfound influence.

But when it comes to Libya, Turkey demands to be listened to. And the West needs Turkey on side.

There is a warm tinge of righteousness.

Some admiringly speak of Sarkozy's "blitzkrieg diplomacy". It has led others to point up the failings of multilateralism: the indecisiveness, the dithering, the inconclusive summits, the inability to act. Even in a continent that witnessed the barbarism of Srebrenica, international bodies allowed Gaddafi's forces to get to the gates of Benghazi.

So history turns. Back in 2008, I remember how Barack Obama's election was saluted as the return to multilateralism and nodding in agreement in the front row was the European elite.

Whilst in Paris I was reminded that catching the zeitgeist is often a fool's game. The Eiffel Tower is a symbol to it. Its muscular pig-iron girders caught the imagination of the futurists.

"We exclaim the whole brilliant style of modern times," declared one of their manifestos. "Cars, airplanes, railways, grandiose steamships". The Eiffel Tower was their great totem. For Severini, Boccioni, Delaunay and others it pointed the way to the future. The machine age would change humanity. Within years, the machines they admired so much would be turning in the service of war.

Many years later, Francis Fukuyama eyed the closing of the Cold War as the "end of history". Within a few years we were living with radical Islam. And yet with the revolutions unfolding in the Middle East his view that the Western Liberal democracy may prove to be "the final form of human government" may still have its time.

I mention all this because in the corridors of Brussels there is often a certain swagger about the future. Last year the President of the Commission, Jose Manuel Barroso said that "the EU's decades of experience in transnational cooperation makes it an obvious laboratory for globalisation, a champion of global governance".

Certainly among the alumni of the College of Europe - that finishing school for the European political elite - there is a belief that they have caught the wave of the future; that the nation state is withering, that increasingly we live in an inter-dependent world. It is a belief that runs through the work of the EU's founding fathers: De Gasperi, Monnet, Schuman, Spaak, Delors and Spinelli.

Self-evidently there is an extent to which this is true. The environment, nuclear safety, the inter-dependence of economies and markets (to name but a few) demand international co-operation.

And yet at this moment there is reason to pause, to wet the fingers and detect which way the wind blows.

The biggest challenge facing Europe is growth. It is the holy grail. Without it so much else fails. Last week David Cameron described the EU as a "low-growth area". European officials have toiled away coming up with a new plan for growth. A 2020 strategy has evolved out of the Lisbon Strategy and will be lucky to escape the same fate. The earlier document was canned.

There is a wide consensus that the single market needs expanding and of course it needs to be policed but - in the face of global competition - outsiders are urging a bonfire of regulations.

And this takes us to the spirit of the times. Time Magazine's man of the year was Mark Zuckerberg, the founder of Facebook. He was a shoo-in; he changed the planet. In an allied essay Richard Stengel said of the Facebook phenomenon: "There is an erosion of trust in authority, a decentralizing of power."

However obscure the motives of Julian Assange, Wikileaks appeals to a similar desire for openness and transparency.

There are two questions for Europe. One is obvious and easy - where are the Zuckerbergs? The second is more fundamental. Is Europe still too tied to regulation?

Last week the EU unveiled Euro Plus Pact; a plan to more closely integrate European economies in the eurozone. Other nations are lining up to join. Barroso is optimistic "the economic and monetary union will finally walk on its two legs instead of limping along".

That, too, raises questions. Does centralising control of tax and spending belong in the future or to the past? Critics say it smacks of the dead-hand of central planning.

It is too early to discern the message of the Middle East uprisings. The motives are mixed: freedom, democracy, work, anger at corruption, the desire to live a normal life. Certainly the rise of populist parties in Europe testifies to the resentment with elites.

So much of this is like looking through a glass darkly. Yet for Europe the challenge remains - how to catch the future? Is it on the side of the vast multi-national organisations or does it lie with regulation-lite administrations where power is handed back to individuals and communities?