Eurozone crisis: David Cameron defiant after treaty veto

At least 23 of the 27 member states are now going ahead with their own treaty to bring in tougher economic sanctions and restore single market credibility and stability.

Only the UK and Hungary were certain today to stay out of the new grouping, with Sweden and the Czech Republic consulting their parliaments before deciding.

But Mr Cameron was unapologetic at a dawn press conference in Brussels after 10 hours of talks at a summit in Brussels.

He said he wished the eurozone well with its new treaty, but the UK could not accept it as the safeguards he had demanded were not on offer.

The Prime Minister declared: “I had to pursue very doggedly what was in Britain’s interests, which is very difficult in a room where people are pressing you to sign up to things because they say it is in all our interests.”

What was in Britain’s interests, said Mr Cameron, was to win guarantees that in return for backing a 27-nation treaty change to bring in a new “fiscal compact”, the UK’s voice in crucial policy issues on the single market and the financial services sector - vital for the City of London - would not be diminished.

Without such guarantees he did not back the treaty, prompting Germany and France to lead the move to set up a separate treaty to achieve their aims.

He insisted the decision to create a new, separate treaty instead of being able to forge a “treaty within a treaty” did not leave Britain isolated.

Ideally Mr Cameron wanted a treaty change agreed by all 27, with the necessary UK safeguards to ensure crucial decisions were not taken with full UK involvement.

But before the summit the Prime Minister said that even a “17-plus” deal did not mean any change in Britain’s own EU treaty obligations.

Efforts to agree a 27-way treaty change were abandoned just before dawn, after 10 hours of talks on what to do to pave the way for tougher economic rules and thus more market confidence in the ability of the euro to overcome its troubles and avoid future seismic shocks to the system.

Mr Cameron argued hotly that he needed to take home clear evidence that British backing would not mean compromising the country in Europe.

Early today some were saying that a separate treaty including the vast majority of member states amounted to far more risk of isolation, with the new grouping bound to consider issues vital to the UK without a British representative in the room.

Mr Cameron was sanguine, saying he wished the eurozone well with its new treaty, but it was not for the UK without the safeguards he demanded.

“We wish them well because we want everyone to sort out their problems because we all need that (economic) growth,” he said.

He denied any deeply damaging rift as a result, saying: “There were strong disagreements but it was good-natured. People understood each other. That relationship will be maintained and will work well, but at the end of the day I made my judgment that it was not in Britain’s interests (to take part).

“I effectively wielded the veto.”

French president Nicolas Sarkozy staged his own press conference to declare that Mr Cameron had made “unacceptable” demands for exemptions from certain financial regulations in return for joining in the “fiscal compact” enshrined in the treaty change.

And European Commission president Jose Manuel Barroso said he regretted that unanimity on treaty change had not been possible.

“Those that have today approved this new fiscal compact have stated that they want to put it as soon as possible into a new fully-fledged treaty, after revision of the current treaties,” he said.

“Having seen it was not possible to get unanimity, it was the proper decision to go ahead at least with those ready to commit immediately. That includes all 17 in the eurozone, plus some who are not in the euro area but want to take part in this fiscal compact.”