In the propositional modal (and algebraic) treatment of two-variable
first-order logic equality is modelled by a diagonal' constant, interpreted in square products of universal frames as the identity (also known as the diagonal’) relation. Here we study the decision problem of products of two
arbitrary modal logics equipped with such a diagonal. As the presence or
absence of equality in two-variable first-order logic does not influence the
complexity of its satisfiability problem, one might expect that adding a
diagonal to product logics in general is similarly harmless. We show that this
is far from being the case, and there can be quite a big jump in complexity,
even from decidable to the highly undecidable. Our undecidable logics can also
be viewed as new fragments of first- order logic where adding equality changes
a decidable fragment to undecidable. We prove our results by a novel
application of counter machine problems. While our formalism apparently cannot
force reliable counter machine computations directly, the presence of a unique
diagonal in the models makes it possible to encode both lossy and
insertion-error computations, for the same sequence of instructions. We show
that, given such a pair of faulty computations, it is then possible to
reconstruct a reliable run from them.

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