David Cameron will warn EU leaders tomorrow that Britain must not be relegated to an EU second division when eurozone countries adopt greater fiscal integration.
At the EU summit in Brussels to discuss the eurozone crisis, the Prime Minister will warn that the euro's 17 members must not dictate policies for the 10 countries, including Britain, that have not joined the single currency. His intervention reflects growing fears among British ministers that the 10 could be virtually frozen out of decisions that would have a huge impact on their economies – such as the single market, bank regulation and EU directives affecting small and large businesses.
Mr Cameron does not believe the 17 are plotting a "caucus" system in which they would meet before ministerial meetings of the 27, then impose pre-cooked proposals on the entire EU. But he is worried this could be an unintended consequence of the rush to fiscal union because the 17 are focused on a short-term solution rather than the long-term implications. One British minister said: "It is a big worry. We are alive to the threat... watching it very carefully and we will be demanding safeguards. We are not alone in this."
The threat of being marginalised in the EU could fuel the growing Conservative rebellion over Europe, which Mr Cameron is struggling to contain. The Commons will vote on Monday on a proposal for a referendum on whether Britain should remain in the EU on the current terms, leave the union or renegotiate its membership.
Sixty-one Tory MPs have defied Mr Cameron by backing the motion. The Prime Minister has decided to take on the rebels by trying to defeat the proposal rather than allowing it to be passed. His tactics have infuriated Tory Eurosceptics. Yesterday Downing Street said the Government would oppose two softer amendments proposed by other Tory MPs.
The call for a referendum is likely to be defeated because Labour will oppose it. But Labour MPs are also split. Yesterday Graham Stringer, a former minister, said: "I think it is a mistake of all three party leaders when the public are clearly aching for a say on Europe to say, no, you can't have it."