Prime Minister David Cameron has ratcheted up the rhetoric about protecting Britain's interests but the need to shield a faltering economy from storms across the Channel will soften his negotiating stance at this week's EU summit.

Cameron has to juggle the demands of a Eurosceptic wing of his Conservative party, who are baying for powers to be clawed back from Brussels, with the risk of obstructing a deal to rescue its biggest trading partner.

Speaking in parliament on Wednesday, Cameron said he would drive a hard bargain as other EU countries ramped up their demands for institutional change.

Reclaiming more power over the financial services sector, which makes up more than 10 percent of the British economy and employs more than one million people, was one area Cameron highlighted.

It's absolutely vital that we safeguard it (the financial services industry), Cameron told parliament.

We do see it under continued regulatory attack from Brussels and I think there is an opportunity, particularly if there is a treaty at 27 (EU nations), to ensure some safeguards not just for that industry but to give us greater power and control in terms of regulation here in this House of Commons.

However, with Britain's economy flirting with renewed recession and the government committed to years of spending cuts, it looks like economic pragmatism will overshadow all.

What matters most to Britain's national interest now is that the eurozone sorts out its problems, Cameron wrote in an article in The Times on Wednesday.

These have been having a chilling effect on our economy for the past 18 months, and the longer the crisis continues, the more it will damage us.

Germany and France have talked about changes to the European Union treaty to try to resolve the single currency's rolling crisis.

Cameron disappointed the restive eurosceptics by saying he did not expect that to trigger a referendum in Britain. Even some moderates said he had weakened his position by ruling out giving Britons a say.

Employment and social law are areas where Britain would like to claw back powers but Cameron must not overplay his hand.

It would probably be unwise for Cameron to try to extract a price, as it were, said Richard Jeffrey, chief investment officer at Cazenove.

Anything which impedes the eurozone making progress will go down so badly that the risks outweigh the benefits by a magnitude. Cooperating now might give Cameron a greater chance of securing concessions in future, Jeffrey said.


Britain is the largest economy of the 10 countries which are members of the EU but not part of the single currency. The eurozone countries could press ahead with their own treaty changes if Britain and others balk.

That option might have short-term political appeal for Cameron who leads a coalition with the smaller, pro-Europe Liberal Democrats and wants to avoid a repeat of the guerrilla warfare over Europe that tore his party apart in the 1990s.

Around 80 Conservative MPs -- more than a quarter of the total -- defied Cameron in October and backed calls for a referendum on Britain's membership of the EU.

Britons are unenthusiastic about the EU, which is portrayed in the press as a cash-guzzling bureaucracy, but are more concerned about rising prices and unemployment than a debate about the country's place in Europe.

From Cameron's point of view an EU 17 treaty might be easier politically, said Stephen Booth, research director of the Open Europe think-tank.

But if you want the UK to be part of a reformed European Union, that is a dangerous route to take.

Open Europe has argued for what it calls an emergency brake to be applied on financial laws to protect Britain from being harmed by decisions taken by a core eurozone 17 nations.

It cited proposals for an EU-wide financial transactions tax, short-selling bans and European Central Bank insistence that euro-dominated financial transactions are processed within the eurozone as damaging to Britain's financial services.

Justice Secretary Ken Clarke, a Conservative veteran who is more positive on Europe, played down suggestions that Britain would bring home a trophy from Brussels.

We're not going to renegotiate any transfer of powers, in my opinion, Clarke told the Finanicial Times.

Open Europe's Booth said the priority had to be to get the eurozone crisis fixed but that Cameron had to have something to satisfy his party and a eurosceptic press.

If he does not come up with some kind of UK concessions, then he will struggle with party management at home, he said.

(Reporting by Keith Weir; editing by Robert Woodward)