They won’t have lost much sleep in Beijing or Bombay over the events in Brussels that reached an ignominous climax in the early hours of yesterday morning. No front pages were held on the China Daily or The Times of India. In fact, everything that has happened in the European Union during recent weeks will have reassured them that they have little to worry about from our continent.

Jacques Attali, former head of the European Bank for Reconstruction and Development, once warned that 21st-century Europe could turn into a “Venetian” continent, inhabited by tourist guides, museum caretakers and hoteliers. Such a Europe, he said, would operate on the fringes of the global marketplace, losing jobs to the rest of the world and consigning itself to permanently high unemployment. Thanks to the actions of the French, his own countrymen, the clear risk is that Europe is indeed heading in this direction. After the EU constitution was rejected by the voters of France and the Netherlands, the Brussels summit should have been an occasion for forging a new start. Instead, President Jacques Chirac decided that the best way to cover his embarrassment was to re-run the battle over the British rebate that François Mitterrand lost to the “Caligula eyed” Margaret Thatcher two decades ago.

For the six months from July 1, when Britain takes over the EU presidency, M Chirac intends to make it his mission to block any attempt by Tony Blair to take the EU in an “Anglo-Saxon” direction. Thus when Britain puts the services directive back on the table — a measure that will reduce regulation across Europe and which could cut prices by 7% and create 600,000 new jobs — the French will turn up their Gallic nose at it. That was exactly the kind of thing, M Chirac will say, that turned French voters against Brussels.

Is there any hope for the EU? We have to look beyond the current washed-up leaders to the next generation. Angela Merkel and Nicolas Sarkozy offer a better prospect than Gerhard Schröder and M Chirac. Gordon Brown, assuming that he succeeds Mr Blair, has shown himself to be quite skilled at building an international consensus. Most encouragingly, the leaders of “new” Europe did not escape the clutches of the Soviet Union to be locked in the deadly embrace of another bureaucratic monolith. But these things take time. After the Brussels failure, the next 12 months will be absorbed with a drawn-out argument about the EU’s 2007-13 budget, interspersed with demands from Britain for reform of the grossly inflated agricultural subsidies. The debate about the constitution will rumble on.

In the meantime, Europe’s economy will continue to fall behind, hindered by regulations, institutionalised rigidities and poor demographics. The Far East will produce cheap and ever more sophisticated goods as well as millions of skilled and educated workers. That is what the EU’s leaders should have been discussing and acting upon. By the time they do so it will be too late.