UK edges closer to EU exit as David Cameron is crushed in bid to block Jean-Claude Juncker's leadership

Mr Cameron’s uncompromising stance over Mr Juncker has strained his relations with some of his natural allies, including Germany’s Angela Merkel (AFP)

Britain took another step towards the EU exit door as David Cameron warned that Jean-Claude Juncker’s appointment to the top job in Brussels would make it harder to persuade the public to remain in the 28-nation bloc.

Mr Cameron’s stark warning came after he suffered a humiliating defeat in his lonely battle to stop the veteran federalist becoming president of the European Commission. At a Brussels summit, EU leaders voted 26-2 to nominate Mr Juncker after Mr Cameron demanded an unprecedented formal vote on a post traditionally settled by consensus. Hungary's Viktor Orban was the only leader to back the Prime Minister.

Asked if the crushing setback had taken the UK closer to an EU exit, Mr Cameron told a press conference: “The job has got harder of keeping Britain in a reformed Europe. The stakes are higher. Do I think it is an impossible job? No.”

The Prime Minister insisted he still believed the British national interest would be served by him recommending an “in” vote in the in/out referendum he has promised in 2017. But after his embarrassing diplomatic defeat, he is under mounting pressure from Eurosceptic Conservative MPs to say he is prepared to urge an “out” vote - and moved one step closer to that today.

Mr Cameron described Mr Juncker’s appointment as a “serious mistake” and said it was a “bad day for Europe,” which had taken a “big step backwards”. But he argued: “This is going to be a long, tough fight and frankly sometimes you have to be prepared to lose a battle in order to win a war.”

He insisted the summit had taken some small steps in the right direction – by promising to address Britain’s concerns about the need for reform and to review the guiding EU principle of “ever closer union”. The 28 leaders also agreed to rethink the process for choosing the next European Commission head in five years time amid concern about a “power grab” by the European Parliament. Mr Juncker, the former Luxembourg Prime Minister dubbed “the career insider of Brussels” by Mr Cameron was the “lead candidate” of the Parliament’s biggest political group.

During the summit, Mr Cameron warned his fellow leaders they could “live to regret” the appointment. He explained later that a future “lead candidate” could have views that some leaders would find unacceptable – such as not standing up for the Baltic States and favouring Russia over countries in Eastern Europe.

Mr Cameron’s uncompromising stance over Mr Juncker has strained his relations with some of his natural allies, including Germany’s Angela Merkel. He hoped other leaders will now take his renegotiation demands more seriously because he had “stuck to my guns” in the battle over the Commission post.

But some leaders gave a different version of the summit’s conclusions. Francois Hollande, the French President, said: “David Cameron spoke about the major interest of a country that could slip away from the EU: we can understand this political domestic issue, but at the same time there is no such thing as a veto. in Europe we need to learn to live together in the framework of rules and treaties, there's no other way.”

Ms Merkel, the German Chancellor, said: “I have every interest in having the UK continue to be a member of the EU. The UK always has to take that decision itself but from a European perspective and a German perspective, I think this is most important and this is what I'm going to work on. We have shown very clearly that we are ready to address British concerns.”

Alexander Stubb, the Finnish Prime Minister, said British voters should "wake up and smell the coffee" about the benefits of EU membership, rather than threaten to quit the 28-nation bloc.

There was stinging criticism from other countries about the way Mr Cameron had campaigned against Mr Juncker. “It was noisy and counter-productive,” a diplomat from one natural UK ally said. “If he had sat on his hands, things could have been different.”

Ed Miliband, the Labour leader, said: “On Europe, David Cameron has now become a toxic Prime Minister. He cannot stand up for Britain's national interest because when he supports something, he drives our allies away."

John Redwood, the Eurosceptic former Tory Cabinet minister, said: “If the rest of the EU continue to be so unsympathetic to UK requirements, more UK voters will draw their own conclusions about the desirability of our continued membership.”

Mats Persson, director of the Open Europe think tank, said: “The Juncker episode is clearly a substantial defeat for David Cameron, and without remedy, increases the risk of Brexit [from the EU]. However, it is far from the end of the story for sweeping European reform."

Mr Juncker, whose appointment has to be rubber-stamped by the European Parliament, was seen drinking in a Brussels bar shortly before his nomination was confirmed by the 28 leaders. He said he was “proud and honoured” to receive their backing.