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.

The Irish government has announced what it calls "a major plan for economic recovery". It is brutal. Some have even labelled it "vicious".

Some of the broad details were trailed well in advance. There will be 15bn euros of savings over the next four years and 6bn of those will come next year. The balance between tax increase and spending cuts will be announced in the budget on 7 December.

Make no mistake, this a hard-knuckle plan. Very few other countries have cut spending by 20%.

Once again, the public sector will feel the axe. Cuts in public sector pay will account for 1.2bn euros. New entrants to the civil service or the public sector will get a 10% pay cut. Jobs will be lost - more than 24,000 of them. There will be cuts in public sector pensions.

The minimum wage will be reduced to 7.65 euros an hour.

Over the next four years, 2.8bn will be cut from the social welfare bill. There will be cuts in services. Students will have to make a new contribution to their studies.

Taxes will go up but not corporation tax which the plan says remains a "cornerstone of industrial policy". VAT will drift steadily up to 23% in 2014. The numbers paying the upper rate of income tax will go up. There will an increase in pension-related taxes.

The purpose of all this is to pare Ireland's deficit from 32% now (taking into account this year's one-off support for the banking sector) down to 3% in 2014.

Many questions flow from this "blueprint for sustainable economic growth".

The government expects economic growth of 2.75% for the years 2011 to 2014. That is far from certain considering the spending cuts they are making.

To date, the Irish people have swallowed the austerity medicine. They may be more hostile this time around. There could well be demonstrations and opposition on the streets.

Elections are sure to follow and it is not clear which party or government will oversee this programme. The Irish people may use the ballot box to reject this package.

The plan says that economic recovery will be export-led. Although costs will clearly be lower - and that should help exports - many other countries that Ireland trades with are also making cuts.

The Irish will need good fortune this plan to deliver.

In a radio interview, the Governor of the Bank of Ireland Patrick Honohan confirmed what most people expected - that some kind of bail-out for Ireland seems to be on the way. They may dress it up as a loan for the banks but it will involve tens of billions of euros. Up until the governor's comments, the Irish government was sticking to its line that it did not need rescuing.

And indeed even after the governor had spoken, Irish Finance Minister Brian Lenihan said that his country was not yet at the point of taking a substantial international loan.

Europe's crisis managers, who have been a busy bunch this year, had not envisaged a situation where a country did not want to be bailed out. Quite the opposite. In setting up various rescue mechanisms they feared the profligate, or those who ran up bad debts, would beat a path to their door.

So when last weekend various officials - some close to the European Central Bank - began briefing that it was only a matter of time before Ireland was bailed out, they did not expect such stout resistance from Dublin.

So why did Ireland try and hold out?

The Irish government is fragile. It faces a difficult by-election. Its hold on power is slight. A bail-out, however dressed up, is a humiliation. It is a judgment on the way the government has run the country.

There is a stigma to being rescued. The image of the Celtic Tiger has long disappeared but the Irish still cherish the memory. For some years they had the fastest-growing country in Europe. To be bailed out would wound Irish pride.

Then there are conditions. One of the reasons that Ireland did so well was inward investment - particularly from the US. Large multinational companies were attracted to Ireland by a corporate tax rate of 12.5%. Others in Europe - including the French and Germans - dislike the tax. They believe it gives Ireland an unfair advantage.

Many government officials in Ireland fear that one condition of a rescue would be to give up their low corporate tax rate. A few days ago, Ireland's Europe Minister, Dick Roche, bridled at the very suggestion. "We are in charge of our own taxes," he said. We shall see what the terms of any loan are.

Then there is the not-so-little matter of sovereignty. Already Irish commentators have focused on the EU Economics Commissioner, Ollie Rehn. When they were not reporting on his visit to an expensive restaurant, they asked: "Is he the most important man in Ireland?" Is this unelected official essentially running the country, was the tone of some of the comment.

There are stirrings of unease here at what Ireland may be giving away. When it was announced that a team of experts from the EU, the IMF and the ECB were coming to Dublin, the opposition leader referred to them as "officials arriving to dictate terms of a bail-out to the government".

Ireland for a long period was enthusiastically European. Many smart people headed to Brussels. They embraced the European identity as a way of distancing themselves from their neighbour Britain. They took great satisfaction in seeing Irish companies buying up big hotels in London.

So there is foreboding as to what a bail-out would signify. One Irish commentator wrote today: "Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission."

Brian Lenihan has defended the increasing influence of the officials from Brussels with references to European solidarity. "We share our sovereignty with Europe in relation to currency," he said. "We pool our sovereignty in this area, so if you're pooling your sovereignty, you have to act with your partners in whatever steps you take." Yesterday he spoke of a "very supportive reaction from the wider European family".

What the Irish government is hoping for - if the Bank governor is right - is a narrow deal to restore the liquidity of its banks so they can borrow more easily. That would be less of a humiliation.

It should not be forgotten that when Irish voters were first given a say on what became the Lisbon Treaty they voted "No". Irish independence is both young and keenly felt.

So if the country is forced to accept a full bail-out, questions will be asked about the future. Will Ireland ever regain control over its budget and its economy?

And that is a question being asked not just on the streets of Dublin but in Athens, Lisbon and Madrid.

Ian Martin, writing in the Wall Street Journal observed: "A new model of government without direct accountability to voters is being constructed."

That, of course, is the long-term implication of this crisis. Presuming that the eurozone does not fracture, its flaws are being used to give the European Commission much greater powers of scrutiny and economic management. And this may go further. While everyone focuses on Ireland, Greece and Portugal, the gap between these economies and Germany only widens. The price of saving the euro may be that the stronger countries bail out the weaker - precisely what German voters were told would never happen.

The "ever closer union" that some dream of may be delivered on the back of a battered currency.

For many in the Conservative Party, this all comes too late. They argue that very substantive powers were handed to the EU under the Lisbon Treaty. That battle, however, is lost to them. A minister said to me: "We are accepting the Lisbon Treaty as a done deal." The past has been accepted. There is no wish, said the minister, to reopen treaty changes.

So to the future. There will now be a "referendum lock": any new EU treaties or major changes to existing treaties will have to be approved or rejected by the British people in a referendum.

Examples would be a decision to give up the UK's border controls or to join the euro.

But ministers will have to decide whether treaty amendments are "significant" before recommending a referendum. New directives or obligations would not necessarily trigger a poll. So some new powers could go to the EU without the British people being consulted.

The judgement as to what is "significant" could prove controversial and could lead to legal challenges.

As expected, there is a "sovereignty clause" confirming that EU laws will only take effect in the UK with the agreement of the UK Parliament. The clause is intended to underline Parliament's sovereignty.

The bill also seeks to limit so-called "ratchet clauses" or "passerelles" where some competences can be automatically extended. These would now require primary legislation.

The bill is intended to deliver on a Conservative election promise that never again will power be transferred to Brussels without the British people having a say.

It will not satisfy a significant number of Conservative back-benchers. Nor will it satisfy others.

But some like Liberal Democrat MEP Andrew Duff say: "We will be keen to reassure ourselves that this Bill does not substantively change the terms of the UK's membership of the EU...

"The move to referenda seems to be calculated to appeal to a populist and nationalist constituency which undoubtedly exists in the UK."

We may soon learn what is to be the final budget increase for 2011. The expectation is that the European Parliament, under pressure, will settle for 2.91%, the figure David Cameron persuaded some European leaders to insist was their top figure. MEPs, who wanted a 5.9% increase, have insisted that extra money is needed to fund the new institutions brought in by the Lisbon Treaty.

Even if there is agreement on a 2.91% increase, the MEPs have put down a marker that in future they want a stronger say over spending including direct EU taxes. Several countries including the UK and Germany oppose such taxes but the budget is shaping up to be another battle-line.

Then there is the euro. Ireland is teetering on the edge of a bail-out. Portugal may not be far behind.

"Ireland is close to losing credibility among investors," said one analyst. "There will have to be a bail-out in the end," said Ashok Shah of London and Capital.

Ireland does not need funds from the markets until June next year but the cost of borrowing is shooting up and there has been a dramatic sell-off of Irish bonds. The sentiment is moving against Ireland surviving without a rescue. Two-thirds of economists and bond strategists polled by Reuters foresaw a bail-out by the end of next year.

Ireland is about to announce its fiscal plan for the next four years. It will need a further 15bn euros in savings. No one doubts the Irish government's determination to find those savings both by raising taxes and cutting spending. The details will be announced in the budget on 7 December. But - and here's the rub - the financial markets fear the austerity measures will only make matters worse by choking demand. Ireland, they believe, is locked in a deadly downward spiral.

Being locked into the euro, Ireland does not have the freedom to lower its exchange rate and so boost its exports. There are only two alternatives left: fierce austerity and/or a bail-out.

Here again there are battle-lines. Several European leaders have recently said that the whole European project depends on the euro surviving in its present form. They are statements rooted in a deep anxiety but no one should doubt the determination of Europe's high officials to fight to save the single currency. The question is this: Is it better to defend countries staying in the euro at all cost or might it make sense for some countries to leave the single currency for a period, sort out their economies and then rejoin the euro some time in the future?

Much of the European year has been devoted to firefighting to save the euro. The final weeks of 2010 look as if there will be more of the same. It is another fault-line.

It did not help sentiment that the Greek government announced that it was unlikely to meet the budget deficit agreed with the EU and the IMF. The deficit will likely be 9% rather than 8.1%.

And then lurking in the background is the big clash of visions. Herman Van Rompuy, the president of the Council, declared in Berlin that "euroscepticism leads to war". He went on to say that "a rising tide of nationalism is the EU's biggest enemy".

He added the thought that "the time of the homogeneous nation state is over". Those comments have enraged some but President Van Rompuy speaks with a candour not always shared by other senior officials. You know where you stand with him. He challenges the idea of the nation state surviving in the globalised world.

Of course there are others who say that the EU is profoundly undemocratic, bureaucratic and wasteful of money. They would argue that increasingly - when given the chance - Europe's voters show they see their identity tied to the nation state.

But all around there are big defining arguments over the future shape of Europe.

In his view "suppressing emotion is even more dangerous" than broaching subjects that were recently largely off-limits.

Others, like analyst Prof Klaus Kocks, have issued a note of caution. "As a German," he told me, "you have to be more careful than others. You have to accept our history."

I met Thilo Sarrazin at his old school in Recklinghausen. He was there to promote his book, Germany Abolishes Itself. He is both reviled and admired for its controversial thesis.

Outside the school were a handful of protesters. One banner accused Mr Sarrazin of acting like the Nazis. There were many more, however, who had bought tickets to hear him. His book has sold close to a million copies.

His essential message is that Muslims are either "unwilling or unable to integrate" into Western society. "If the majority of migrants from non-Muslim countries don't have any obvious problem integrating," he told a packed hall, "then the failure to integrate on the part of migrants from Muslim countries can't be due to a fault on our side - because all are treated equally. It has to be because of a characteristic of Muslims themselves."

He is not a great speaker. He deals in statistics. He recognises that some Muslims have integrated, but he believes Germany has gone too far in trying to accommodate them. "People who obey laws are welcome to live here," he told me, but he wants to end Muslim immigration.

For those already in Germany, welfare payments would be dependent on learning German and acquiring language skills. Parents who do not send their children to school (for religious reasons) should be fined. Forced marriages should be forbidden. His message is that Muslim migrants must accept German laws, the constitution and the values of their new society.

His comments have set off a huge debate. "We have a very serious shift in discussion," Prof Kocks told me. What makes his book sales all the more extraordinary is that Thilo Sarrazin said, as part of the publicity for the book, that Jews had a certain gene. He was condemned by mainstream politicians and the remark led to his resignation from the board of the Bundesbank. Even so, the public made his book a best-seller.

Last month, Chancellor Angela Merkel said multiculturalism had "failed utterly". What she meant was that some immigrants and others who had lived in Germany for some years were not integrating. Last week at a regional conference for her party in Essen she said: "Of course integration has changed our society, but not at the expense of our core values... We are Christians and this informs everything we do... We are for diversity but we will not abandon our basic beliefs."

What seems to be changing is what is expected from immigrants. The past idea of multiculturalism was that migrants could live in their new societies much as they had done previously in their home countries. Now the emphasis is on them adapting. The fear is that otherwise there will be separate, parallel communities.

So mainstream politicians are speaking out. Joachim Herrmann is the interior minister in Bavaria. His party, the conservative CSU, is in coalition with that of Angela Merkel. He told us in an interview: "You have to accept our laws... Just because you come from a different culture where a man can treat his wife differently, you can't do that here. There can be no compromise."

The premier in Bavaria, Horst Seehofer, has called for an end to immigration from "Turkey and other Arab countries".

Muslims are fearful of where this new tone is heading. Nurhan Solkan is general secretary of the Council of Muslims. She says that the views of the far right have now entered the political mainstream. She points out that many immigrants have integrated well. Many will tell you how when they first came to Germany, no one wanted them to integrate. They were guest-workers. They were barred from citizenship. Nurhan Solkan said more and more people of Turkish origin were moving back to Turkey.

Dr Kocks told me: "I don't want to go back to nationalism again." He does not think that is happening. There is no growth in far-right parties. But he says there is a deep anger in society over stories, for instance, that some female teachers have been shown disrespect by Muslim boys.

Prof Jurgen Habermas, writing in the New York Times last week, said Germany was being roiled by "waves of political turmoil over integration, multiculturalism and the role of the 'Leitkultur', or guiding national culture." He said it was reinforcing trends towards xenophobia. He sees clear dangers in getting immigrants to assimilate "the values of the majority culture and to adopt its customs".

But that is the new mood and, judging by the success of Thilo Sarrazin's book, it seems that many Germans want minorities to positively embrace being German.

At almost the same hour British voters were learning of the severest cuts to services since World War II.

A thousand miles from Strasbourg, Portuguese MPs were wrestling with their own budget and the inevitable cuts that must come.

And 1,300 miles from where the MEPs were debating, Irish voters were being told that more would have to be squeezed out of hard-pressed taxpayers. Public sector workers, who have seen their wages cut, know that more bad news is on the way. When I was in Dublin two weeks ago the atmosphere was grim.

The mood in Strasbourg, however, was very different. They agreed to increase the EU budget by 5.9% - almost the same level as proposed by the Commission. There were 92 MEPs who voted in favour of freezing the budget, but 564 supported an increase.

British ministers called it "outrageous". One senior diplomat in Brussels called the decision "nuts". Today one British Liberal Democrat MEP, Chris Davies, said it was plain barmy for the EU to be demanding extra contributions from member countries. David Cameron told the House of Commons in London: "We've called for a cash freeze in the size of the EU budget for 2011 and we're working very hard to make the case across Europe."

Quite a number of countries take the British view, although a majority would settle for an increase of 2.9%. There will now be an attempt to reach a compromise between the Council and the Parliament. If no deal is reached, then the 2010 budget continues. That is favoured by the British, who believe it would be in tune with the spirit of the times.

The President of the European Parliament, Jerzy Buzek, defended today's decision. He said: "Cuts cannot be simply populist measures limiting many possibilities - for example, for education, training or research." The Parliament rejected what it called "arbitrary reductions in commitment appropriations... that jeopardise the implementation of Union policies and programmes already agreed".

Of course, the definition of cuts is to reduce or trim commitments already made. Others pointed out that under the Lisbon Treaty the EU was building new institutions, like a diplomatic service, that had to be financed.

There is no scaling back the cost of running the EU's institutions, which account for 5.7% of the budget.

Scottish National Party MEP Alyn Smith, who voted to freeze the budget, said: "Freezing the budget for next year would indeed be inconvenient for a number of projects, but some projects could do with a bit of harder analysis."

Now the majority mood in the European Parliament is to avoid wrangles over the budget with member states in the future. The plan of the four largest political groups is to give the EU more budgetary autonomy, with an independent source of income. Raising EU-wide direct taxes will be hugely controversial with member states, and several have already voiced their opposition. But it is now firmly on the Parliament's wish list.

Power usually follows the money. If the European Parliament was to get its way it would greatly enhance its influence and reduce that of the member states. Tax is one of the most sensitive issues for voters and as this argument gathers pace it will be interesting to discover whether Europe's voters back EU-wide direct taxes.