By: Sky News
David Cameron is being blamed for the failure of the European Union to agree a new treaty to solve the economic crisis in the eurozone.French President Nicolas Sarkozy said the Prime Minister's demands for concessions to protect Britain's financial sector were "unacceptable".
Mr Cameron's defiant stance drew support from eurosceptic Tory MPs who said he had succeeded in protecting the interests of the City of London but critics said it would leave Britain isolated within Europe.
At least 23 of the 27 member states are now going ahead with their own treaty to bring in tougher economic sanctions and restore single market credibility and stability.
Only the UK and Hungary are certain to stay out of the new grouping, with Sweden and the Czech Republic consulting their parliaments before deciding.
Mr Cameron had wanted a treaty change agreed by all 27 member states, with the necessary UK safeguards to ensure crucial decisions were not taken with full UK involvement.
However, tense discussions that went on through the night at a summit in Brussels ended without an agreement to which the British PM felt he could sign up.
Mr Cameron said: "I had to pursue very doggedly what was in Britain's interests, which is very difficult in a room where people are pressing you to sign up to things because they say it is in all our interests."
He said that any new 27-nation treaty would have had to guarantee the UK's voice in crucial policy issues on the single market and the financial services sector - vital for the City of London - would not be diminished.
When it became clear this would not be the case he withdrew the UK's support, prompting Germany and France to lead the move to set up a separate treaty to achieve their aims.
Mr Cameron insisted the decision to create a new, separate treaty instead of being able to forge a "treaty within a treaty" did not leave Britain isolated.
However, it raises the risk of a powerful "inner core" of countries effectively excluding the UK from crucial finance-related discussions and decisions in future which could affect the City of London.
The problem for the 17 is that the use of the EU institutions - particularly the European Commission - to implement their decisions, would require the unanimous agreement of all 27 countries.
It means Mr Cameron still has some cards to play in seeking to safeguard Britain's role, particularly over single market and financial services issues in future decision-making.
European Commission president Jose Manuel Barroso he regretted that unanimity on treaty change had not been possible.
"Those that have today approved this new fiscal compact have stated that they want to put it as soon as possible into a new fully-fledged treaty, after revision of the current treaties," he said.
"Having seen it was not possible to get unanimity, it was the proper decision to go ahead at least with those ready to commit immediately. That includes all 17 in the eurozone, plus some who are not in the euro area but want to take part in this fiscal compact."
He insisted EU lawyers had already stated that it would be possible for the EU institutions to take a full part in policy issues involving the treaty changes.
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