Leading article: Treaty talk that isolates the UK

Angela Merkel and Nicolas Sarkozy are now so used to each other's company that they can almost complete each other's sentences. But their latest emergency tryst to save the euro still managed to spring a few surprises – not least the verve with which they professed their faith in the currency.

The plan is for a new treaty that will require signatories to commit themselves to balance their national budgets. The ingenious part is that, to preserve each country's sovereignty in what amounts to a collective fiscal effort, the undertaking not to exceed the agreed debt limit will be enshrined in national constitutions and policed not by any political institution, but by the European Court of Justice.

There is more than a whiff of French electoral politics here – President Sarkozy is already in campaign mode and sovereignty is as sacred a word in France as it is in Britain. Chancellor Merkel, for her part, won acceptance of automatic sanctions for transgressors, and the removal of all talk of eurobonds from the agenda.

That there is now a plan acceptable to both France and Germany undoubtedly constitutes progress and cheered the markets. But its outline portends difficulties for David Cameron and the UK. A new treaty could enshrine precisely the sort of two-speed Europe that threatens to leave Britain on the sidelines.

Mr Cameron might have to choose between retaining a voice at the top table – by acquiescing in the treaty, without actually joining the euro, which appears possible – and placating Eurosceptics, in his party and in the country, by keeping the whole project at arm's length. Whatever domestic and European challenges face Ms Merkel and Mr Sarkozy, those facing Mr Cameron could turn out in the end to be even stiffer.