Nick Clegg is furious that David Cameron has relegated Britain to being the "lonely man of Europe", as the Prime Minister's dramatic decision to walk away from a eurozone deal threatens the future of the coalition.
Despite publicly backing Mr Cameron for seeking "modest" safeguards for Britain, Mr Clegg is privately seething at Mr Cameron's diplomatic ineptitude and his "spectacular failure" to negotiate properly in Brussels. As the coalition faces the greatest crisis in its 18-month history, The IoS can also reveal:
* Vince Cable, the Liberal Democratic Business Secretary, raised "serious concerns" that Mr Cameron's attempt to protect the City of London outweighed the interests of the wider British economy;
* Brussels insiders were left "gob-smacked" by Mr Cameron's all-or-nothing negotiating tactics, including keeping secret his proposals until the 11th hour;
* Arch-Eurosceptic Tory MPs will meet tomorrow to draw up a list of demands for further detachment from the EU;
* Mr Cameron's standing in Washington is also at stake, with members of the Obama administration present at the summit last Thursday said to be keen that a deal be struck.
While Friday's early-morning veto delighted the Tory right, Mr Cameron will face a stormy reception in the Commons tomorrow when he will give a statement to Parliament on the results of the EU council, with a split at the highest level of government.
Mr Clegg believes the PM's isolation from the EU's other 26 member-states now threatens Britain's relations with the US, weakens protections for the City and puts in jeopardy future foreign investment in the UK.
"Nick certainly doesn't think this is a good deal for Britain, for British jobs or British growth," said a source close to Mr Clegg. "It leaves us isolated in Europe and that is not in our national interest. Nick's fear is that we become the lonely man of Europe."
The Deputy Prime Minister was left dumbfounded when Mr Cameron phoned in the early hours of Friday to say he had presented a take-it-or- leave-it ultimatum to EU leaders at a marathon dinner in Brussels. A senior Liberal Democrat said last night: "We basically went in and said, 'If you don't do as we want, we will shoot ourselves in the head.'"
Before Mr Cameron left for Brussels on Thursday afternoon, Mr Clegg believed he had successfully got the Tories into a "sensible place" which did not involve demanding repatriation of powers. "Nick couldn't believe it when he was woken up at 4am to be told that the whole thing had spectacularly unravelled," a senior source close to the DPM said.
"He could not believe that Cameron hadn't tried to play for more time. That is not how Nick would have played Britain's hand."
At the same time, Mr Cable has expressed his fears within the Cabinet that the tactic of demanding safeguards for the City went against his call for the economy to be rebalanced.
Hardline Eurosceptic Tory MPs remain cock-a-hoop at the sight of a Conservative Prime Minister apparently "standing up to" Europe. John Redwood, a senior Tory backbencher, yesterday insisted that the Government must now turn to "negotiating a new relationship with the EU".
However, Lib Dems have a blunt message for Conservatives who think last week marks the start of a withdrawal from the EU: "If they think we can now go back to Europe with a sackful of demands about repatriating powers, they are living in a fantasy world."
The revelation of Mr Clegg's anger demolishes claims by senior Tories that Mr Cameron was acting in the national interest, not party interest, by vetoing treaty changes designed to save the euro. A senior Lib Dem source said last night it had been: "A spectacular failure to deliver in the country's interest."
Mr Cameron is under increasing pressure from his backbenchers, as a new ComRes/IoS poll shows the Prime Minister has seen the biggest slump in approval ratings this year of the three party leaders, down 22 per cent since December 2010. Ed Miliband is down 17 points while Mr Clegg is down 20.
In the same poll, 52 per cent of people agree that the euro crisis is an ideal opportunity for Britain to leave the EU altogether, while fewer than a third of people, surveyed on Wednesday and Thursday before the EU summit, thought Mr Cameron had shown strong leadership in his dealings with France and Germany.
Critics believe the roots of Mr Cameron's failure can be traced to his decision to withdraw the Tories from the European People's Party grouping of centre-right parties in 2009, severing formal ties with both France's Nicolas Sarkozy and Germany's Angela Merkel. Mr Sarkozy accused Mr Cameron of making "unacceptable" demands for exemptions from some financial regulations, in return for joining in the "fiscal compact" enshrined in the treaty change.
"If they had still been in the EPP, they would have known Sarkozy was being obstinate and could have reacted accordingly," said a government source. "Instead, Cameron stuck dogmatically to his script and was shot down in flames."
George Osborne yesterday insisted that Mr Cameron had no choice but to walk away from the talks: "If we had signed this treaty, David Cameron would have broken his word to Parliament and the public, gone there and caved in without getting the safeguards he was looking for."
But Lord Ashdown, the former Lib Dem leader, told The IoS that the result of the summit had weakened Britain's transatlantic relations. "Washington was in the margins of the talks, willing the negotiations to work. So we don't have a strong position in Europe or in Washington now."
He also criticised Mr Cameron for failing to nurture relations with other EU leaders.
The consequences: When Europe sits down for its next summit, it will be without Britain
The negotiations for a fiscal union will continue: the next summit is in March. But now that David Cameron has used his veto, the talks will take place without Britain. Yesterday Le Monde said Britain may as well leave Europe altogether. There is no legal basis for a member being forced out, but isolation is just as bad.
Angela Merkel, the German Chancellor, spoke by phone to President Barack Obama on the eve of the summit, and the US is keen for a deal to save the eurozone to be negotiated quickly. Timothy Geithner, the US Treasury Secretary, met Mario Draghi, president of the European Central Bank, French President Nicolas Sarkozy and Mario Monti, the Italian PM, among others, last week. A petulant Cameron protecting his own financial services industry at the risk of triggering a collapse in a rescue deal will be frowned upon in the White House. Britain will appear to have even less influence in the world.
Nick Clegg is furious at Cameron's diplomatic failure, while Vince Cable has raised concern at the tactics. Chris Huhne and Danny Alexander, fellow Lib Dem cabinet ministers and arch-Europeans, are unlikely to differ from their colleagues. While Cameron tries to keep his right wing happy, the coalition will be put under greater strain – making it more difficult to get legislation through Parliament.
Some believe that Cameron's isolation in Europe could make it even easier for Scotland's First Minister, Alex Salmond, and the Scottish Nationalist Party to secure independence – and eventually, perhaps, to join the euro. "So Scotland walks away and joins the euro and leaves the Little Englanders having finally got their Little England," said a senior Lib Dem. "The Little Englanders think we will be like Switzerland, but with nuclear weapons. Actually, we'll be like Norway, but without the oil."
Euro verdicts: 'Prime Minister of Little England'
"A complete disaster. The worst foreign policy disaster in my adult lifetime. One of my former diplomat colleagues compared it to Munich. The comparison is wrong, but it shows the strength of feeling."
Tony Blair's former chief of staff
"By vetoing a decision at a time of a European crisis, Cameron could find himself squandering goodwill. Britain is still connected to Europe in many ways outside of the euro."
Head of European economics, Bank of America Merrill Lynch
"The British Government is called upon to compromise and to represent their own country. But to simply present conditions and to say either/or, that's a blatant contradiction to the spirit of the European Union."
Chancellor of Austria
"It is unfortunate but politically inevitable, given the constellation of political forces in this country at the moment. I don't think it's the last word."
Former European commissioner and Tory cabinet minister
"The roots of Cameron's fateful decision lie in his failure to modernise the Conservative Party. He promised to leave the European People's Party, and ever since he has been following his party, not leading it."
Shadow Foreign Secretary
"He went to Brussels with a set of impossible demands. He wasn't there to negotiate; he was there to stage a walk-out. Lib Dem leaders must stop Cameron kowtowing to the Tory right and force him back to the negotiating table."
"Twenty-six vs one? Tony Blair would never end up in that position. He would have prepared something long beforehand to get from the negotiation and stayed there until he got it."
Former European Commissioner and Labour cabinet minister
"Cameron has put the interests of his party above those of his country. It seems he wanted to create a row of this kind simply to meet the requirements of his own domestic agenda. A referendum seems inevitable."
Liberal Democrat MEP
"I am very negative about David Cameron submitting to the 'bastard' tendency. I don't see any stability in the new position: Europe will move on and so will the Eurosceptics and it will end in a great fight to the death."
Former foreign secretary
"In saying he wanted to protect the interests of the City, there is no way you can protect those interests by floating off into the Atlantic, frankly."
Former Conservative deputy prime minister, currently government growth adviser
"The idea of this being any kind of victory for us is just madness. We have lost massively. It was a lose-lose situation and unsurprisingly we lost, while making ourselves isolated from our colleagues in Europe."
Liberal Democrat president
"We allowed Britain and France to fight their old battles again. So what we ended up with is something that pleases nobody. British diplomacy didn't enjoy its finest hour."
Sir Graham Watson
Lib Dem MEP
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