The battle over voting power at the two day EU summit in Brussels triggered a breakdown sooner than many diplomats had forecast and before the Italian presidency had even tabled a compromise proposal on that issue.
The row stemmed from the Nice treaty agreed in 2000, which gave Poland and Spain nearly the same voting rights as Germany, whose population is twice as large as theirs.
The reform would have replaced it with a system under which decisions pass if backed by a majority of more than half of EU states, representing over 60 percent of its population.
France and Germany had both said they would rather have no agreement and risk a crisis than accept a bad deal. French President Jacques Chirac had said yesterday that Europe's history was one of progress through crises.
The breakdown comes after a year of deep splits among European states over the Iraq war and less than a month after finance ministers bent EU budget rules by suspending disciplinary action against France and Germany over their excessive deficits.
Many diplomats sought to play down the damage. "It is not good, but no disaster," one said.
But one of the European Parliament's negotiators on the constitution, Klaus Haensch, told reporters that public confidence would be severely dented.
"It is a very bad signal and a failure of one of the most important summits we have had, and that is not a good sign for the European Union," the German Social Democrat said.