David Cameron under pressure from MPs as EU demands end to rebate

Summit begins with feud as Italy and Spain call for immediate help with borrowing rates

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David Cameron was under mounting pressure on Europe last night as 100 Conservative MPs demanded a referendum and he tried to head off moves to abolish the £3bn-a-year rebate on Britain's EU contributions.

In a strongly worded letter to the Prime Minister, Tory MPs urged him to pass a law before the 2015 general election to guarantee a referendum "on the nature of our relationship with the EU" during the next five-year Parliament.

John Baron, MP for Basildon and Billericay, said in the letter that the case for a referendum "is growing by the day". He argued that the "meddling" EU is "very different" to the EEC Britain joined in 1973, pointing out that no one under 55 has had a chance to vote on our membership. A referendum pledge made "sooner rather than later", he said, would address "the very real lack of public trust" in politicians.

The growing Tory campaign gave Mr Cameron a headache as he attended yet another EU summit overshadowed by the eurozone crisis.

Deep divisions emerged as Italy and Spain, backed by France, demanded urgent measures to lower their crippling borrowing rates. An acrimonious summit dragged on late into the night as Italian and Spanish leaders threatened to delay approval of a €120bn "compact for jobs and growth" unless they secured immediate help on their borrowing costs.

The moves by Spain, Italy and France increased the pressure on Angela Merkel, the German Chancellor, to do more to bolster the single currency. Although there were some signs that she might soften her hardline stance against pooling government debt, her room for manoeuvre was limited because she needs to win approval today from the German parliament for the EU's new bailout fund. When the fractious summit ends today, EU leaders are expected to ask four senior EU officials to draw up by December an historic "road map" and timetable for genuine economic and monetary union. Yesterday's talks began a debate on the EU's €1 trillion spending plans for 2014-20.

The European Commission wants to scrap the rebate on Britain's payments won by Margaret Thatcher, which refunds the UK 66 per cent of the difference between its payments to and receipts from the EU. The Commission argues Britain no longer needs the rebate – a view echoed at the meeting by Mario Monti, the Italian Prime Minister, who described it as unacceptable.

Mr Cameron put down a marker by declaring that the rebate would not be surrendered or cut in budget talks due to conclude in December. "It is not up for negotiation," said one UK official. The Prime Minister will come under huge pressure to make concessions. He had an understanding with Nicolas Sarkozy that Britain would not demand radical reform of the Common Agricultural Policy if France did not attack the UK rebate. But the deal is unlikely to be maintained by François Hollande, France 's new President.

The Prime Minister was embroiled in a separate row over where a long-planned European patent court should be based. Germany and France ganged up to squeeze London out and split the court between Munich and Paris. Mr Cameron was accused of holding up the summit when he blocked the move. Plans for a single European patent is a saga that has been running for almost 40 years.

Over a working dinner last night, Mr Cameron rejected demands for Britain to join the banking union, saying it should apply only to the 17 eurozone countries.