Pressure builds on Cameron ahead of EU summit

David Cameron is under pressure from all sides as he heads to Brussels today to join fellow European Union leaders at a summit that is likely to prove crucial in determining the fate of the euro. The British prime minister, who has pledged to protect the country's financial services sector and the single market from new EU regulations, faces demands from members of his own party to hold a referendum on the creation of a fiscal union in the eurozone and win significant concessions for the United Kingdom in return for his support.

But he risks alienating other European leaders by threatening to veto changes that are widely considered vital to protect the single currency from collapse. Cameron's tactics have been described as "obnoxious" by EU officials, The Guardian reported. German Chancellor Angela Merkel and French President Nicolas Sarkozy have indicated that they will press ahead with their plans for strict eurozone fiscal discipline with or without British backing – raising concerns that the UK might be left in the second tier of a two-speed Europe.

The President of the European Commission José Manuel Barroso said today that he did not expect leaders to arrive in Brussels "saying what they can not do, but what they will do for Europe". The whole world was watching and wanted "not more national problems but European solutions". He added: "It is extremely important that we all together, all the EU shows that the euro is irreversible, that we are all standing supporting the euro. And I believe that this is possible." Eurogroup president Jean-Claude Juncker said he would not accept Britain blocking a deal.

Under pressure from eurosceptic MPs, Cameron promised to show "bulldog spirit" to get a good deal in exchange for supporting efforts to save the euro. However, senior members of the Conservative Party have said that changes to the EU treaty advocated by Angela Merkel and Nicolas Sarkozy would have to be either blocked or put to the British people in a popular vote. Speaking to the BBC yesterday, London mayor Boris Johnson – a key rival of Cameron's – said: "If we felt unable to veto it, then certainly it should be put to a referendum." He added that eurozone leaders were in danger of "saving the cancer and not the patient" by pushing for fiscal union.

Northern Ireland secretary Owen Paterson said Cameron had to win back some powers for Britain if he was going to support the Franco-German plan. In an interview with The Spectator magazine, he said: "Bluntly, they may well go ahead and in effect create a new country, with very central control of taxation and transfer of funds to weaker areas. But if they want to go ahead and form their new country, we want to get the power to run our country back." Echoing Johnson's comments, he said there would have to be a vote "because I think the pressure would build up". Paterson is backed by former Conservative leader and work and pensions secretary Iain Duncan-Smith, who also called for a referendum on Sunday. More than 80 MPs from his own party recently defied Cameron in parliament by demanding a nationwide vote on Britain's relationship with the rest of Europe.

But Cameron has ruled out a popular vote on the basis that the creation of a eurozone fiscal union would not transfer powers from the UK to Brussels, the key test of the new referendum lock written into law by the government. The prime minister has insisted he would fight for Britain's national interests at the summit, by defending the single market and the City of London. He has strongly opposed the creation of a tax on financial transactions because it would disproportionately affect the UK's dominant financial services sector. But the policy was included in Merkel and Sarkozy's letter to European Council president Herman Van Rompuy outlining a new EU framework. The French and German leaders have said they want a deal across all 27 member states but would go forward with just eurozone countries plus any other willing participants if it was necessary.

The British prime minister, whose position is complicated by being in coalition with the pro-Europe Liberal Democrats, has said that the priority for the UK was solving the eurozone crisis, because of the "freezing" effect it was having on the economy. Meanwhile the leader of the opposition Labour Party Ed Miliband criticised Cameron on Wednesday for his "confusing" stance. He claimed the prime minister had retreated from a commitment to take advantage of treaty changes to repatriate powers over social and employment law from the EU in return for British support. In a reference to former Conservative prime minister Margaret Thatcher's famously stubborn negotiating tactics over Britain's rebate, Miliband said Cameron had gone from "handbagging" to "hand-wringing".

Many members of the Conservative Party, which has historically been divided over Europe, reject the prime minister's claim that treaty changes would not result in a transfer of power to Brussels. David Davis, who stood against Cameron for the party leadership in 2005, said in parliament that a fiscal union would have "huge implications for Britain, whether or not we are actually directly involved". But Michael Howard, a former party leader, said he supported Cameron's position. He told the BBC: "I would like to see a rebalancing of powers between Britain and Brussels, and I hope that at some point we can return to that agenda. What is pressing at the moment is the need to help the eurozone overcome its crisis, because the world economy is in a very fragile state and a disorderly break-up of the eurozone could bring about an economic catastrophe on a global scale."

Even if any new rules agreed at the summit apply only at eurozone level, Britain's support would be required if EU institutions such as the commission and the European Court of Justice were used to oversee national budgetary discipline. But it is not only Britain that has concerns about the proposals. Finland has said it is opposed to making the European Stability Mechanism, the replacement for the European Financial Stability Facility, subject to qualified majority voting, meaning a consensus would not be required for decisions to be made on its use.