Cameron to demand City safeguards before signing any new rescue deal

Mr Cameron meets a military wives' choir at a Downing Street reception yesterday (PA)

David Cameron last night threatened to veto a new European Union treaty to help to solve the eurozone debt crisis unless it safeguards the City of London.

The Prime Minister raised the stakes over the Franco-German plan after it emerged that the proposed treaty was likely to cover all 27 EU members, including the UK.

Some British ministers had hoped it would need approval only by the 17 eurozone nations France favours a "eurozone-only" deal but EU sources suggested yesterday that a majority of countries back Germany's plan for an EU-wide treaty.

So does the European Commission, amid legal doubts over whether a 17-nation deal could use bodies such as the European Court of Justice to impose budgetary curbs on governments.

After Tory MPs stepped up calls for Mr Cameron to secure a "repatriation of powers", the Prime Minister warned fellow EU leaders that he would ensure at the Brussels summit that the single market and Britain's financial services industry would be protected. He told the BBC: "I will not sign a treaty that does not have those safeguards in it.

"If they choose to go ahead with a separate treaty, then clearly that's not a treaty Britain would be signing or amending, but if they want to use the European institutions then we will be insisting on the safeguards and the protections that Britain needs."

He conceded the most important British interest now was to sort out the eurozone crisis. His stance could force the summit to opt for a 17-nation deal rather than an EU-wide one. In practice, countries who want all 27 to sign might offer Mr Cameron a form of words reaffirming their commitment to the single market.