Eurosceptic MPs furious at PM's about-face over 'fiscal compact'

David Cameron provoked a furious backlash from Conservative Eurosceptics after he beat a retreat over his opposition to the agreement to enforce budgetary discipline in the eurozone.

Tory MPs – who hailed him as a hero last month when he vetoed an EU-wide treaty to save the euro – turned their fire on the Prime Minister after he watered down his objections to the "fiscal compact". His critics claimed the gains he made last month had now been lost.

At the time, Mr Cameron insisted the other 26 EU nations could not use bodies such as the European Court of Justice (ECJ) to enforce fines on euro members who breach deficit limits. He feared this could harm British industry. But at another EU summit in Brussels last night, Mr Cameron nodded through the agreement, although Britain will remain outside it. Denying a climbdown, he said: "We don't want to hold up the eurozone doing whatever is necessary to solve the crisis as long as it doesn't damage our national interests."

Last night 25 of the EU's 27 states signed the agreement. Britain found itself in a minority of two as the Czech Republic also refused to sign, citing parliamentary procedural problems.

The PM insisted the agreement could not encroach on the responsibilities of the 27-strong Union and must not undermine the single market.

He said: "There are a number of legal concerns about this treaty. That's why I reserved the UK position on it. We will only take action if our national interests are threatened."

But there is little prospect the UK will take legal action, not least because the case would be heard by the ECJ itself, which normally rules in favour of European integration. Tory Europhobes plotted their next moves at Westminster and Mr Cameron faces criticism for his retreat when he makes a Commons statement about the summit today. Philip Davies, a Eurosceptic, warned the new stance would make the PM look more like John Major than Margaret Thatcher: "We saw in the opinion polls how popular he was in December. He would be equally unpopular if the British public thought he was going to backslide."

After alienating EU leaders last month, the PM tried to use the gathering to build bridges. But there was little sign of that with France as No 10 hit back at a claim by Nicolas Sarkozy, who declared: "The UK has no industry any more." A British official pointed to figures showing that industrial production as a share of gross domestic product was 15 per cent in the UK and only 12.5 per cent in France in 2009.