British Prime Minister David Cameron on Monday defended his decision to refuse to join the other 26 European Union member states in a fiscal union, and dismissed growing calls in his Conservative Party for Britain to leave the EU, saying remaining in the bloc was vital to Britain's national interests.
"Britain remains a full member of the EU and the events of the last week do nothing to change that," Cameron told parliament during a debate on last week's European Union summit . "Our membership of the EU is vital to our national interest. We are a trading nation and we need the single market for trade, investment and jobs."
"We are in the EU and we want to be," he added.
Cameron's decision not to take part in an EU treaty change aimed at tightening fiscal rules for euro-zone member states has isolated Britain in the 27-nation bloc and opened a rift in his government coalition with the pro-European Liberal Democrat party.
Cameron said he voted against amending the Lisbon Treaty to enshrine new debt rules because his call for safeguards for the financial sector had been rejected by EU partners at the summit. He added that he had not sought the safeguards just for Britain but for the whole EU, to protect the competitiveness of banks. "The right answer was no treaty," he said. "It was not an easy thing to do but it was the right thing to do."
Financial services are a particularly important sector for the British economy.
Cameron has won applause from euroskeptics in his Conservative Party for wielding Britain's veto in a move that will force the other EU members to negotiate a separate treaty to enshrine fiscal discipline in a bid to tackle the euro debt crisis.
'Bad for Britain'
But Liberal Democrat leader Nick Clegg, the deputy prime minister, said on Sunday he was "bitterly disappointed" by the outcome of the EU summit and that he had had told Cameron it was "bad for Britain."
However, Clegg denied that the coalition could now collapse. "It would be even more damaging for us as a country if the coalition government were now to fall apart. That would create economic disaster for the country at a time of great economic uncertainty," said Clegg.
Clegg criticized Conservative lawmakers who are now pressing Cameron to follow up his veto with a referendum on Britain's membership of the EU.
"A Britain which leaves the EU will be considered to be irrelevant by Washington and would be considered a pygmy in the world when I want us to stand tall and lead in the world," Clegg told BBC television.
European politicians and commentators have been venting their fury not just at Cameron's actions in Brussels but at decades of British obstruction in EU matters. Many commentators in Europe and in Britain, as well as Britain's opposition Labour Party, have said that Cameron has seriously damaged Britain's interests by isolating the nation in Europe .
'English Right Is World's Stupidest'
On Monday, the head of France's financial sector regulatory authority, Jean-Pierre Jouyet, said Cameron's actions proved the British political right is the world's dumbest.
"For a long time it was said that the French right was the world's stupidest," Jean-Pierre Jouyet, head of France's AMF regulatory agency, said in an interview on France Inter state radio.
"I think the English right has shown it is capable of being the world's stupidest, in serving purely financial interests and not the national interest. That's regrettable because we need our British friends in Europe."
On Monday, French President Nicolas Sarkozy blamed Cameron for the political rift. "There are clearly two Europes," Sarkozy was quoted as telling Le Monde newspaper on Monday. "One that wants more solidarity among its members and more regulation. The other which is attached only to the logic of the single market."
Sarkozy added that the legal basis of a new accord to enforce debt and deficit rules in the 17-nation euro area with quasi-automatic sanctions and intrusive powers to reject national budgets would be worked out before Christmas.
"In the next fortnight, we will put together the legal content of our agreement. The aim is to have a treaty by March," Sarkozy said.
'Europe Will Go On Without You'
German mass circulation Bild, a veteran of many tabloid spats between Germany and Britain, weighed in on Saturday with the headline "Bye Bye, England. Europe will go on without you."
In a tongue-in-cheek commentary, Bild wrote: "Dear British, Europe without you is like fish without chips, like London without driving on the left, like beer without foam. But you must decide now. Do you really want to be a lonely island and do everything differently? If yes, be honest -- and get out of the EU altogether."
It emerged on Monday that the British government may yet deepen its isolation by obstructing plans to agree a separate treaty on budget discipline.
British May Obstruct Planned Treaty
Cameron's office said it was not clear how EU institutions such as the European Commission could be used under two different treaties -- the Lisbon Treaty and the planned new treaty among the other 26 members.
"There are issues that are raised by this, about institutions serving two masters -- the euro zone and the European Union -- and we need to look at those issues very carefully," Cameron's spokesman Steve Field told reporters.
"If you have the institutions serving the 27 and serving the 17, there is potential for conflict of interest," he said, adding that discussions on the new deal would likely continue for many weeks.
Meanwhile, it became evident on Monday that the summit deal had failed to restore market confidence, with the euro and share prices sliding, and bond yields for Italy and Spain rising again, ending a market rally triggered on Friday by EU leaders' decisions.
Traders said the ECB intervened to buy short-term Italian debt after yields on Italian and Spanish debt rose sharply. Despite all the plans for tighter euro zone debt rules, there was still no prospect of a "big bazooka," no provision of unlimited funds, to satisfy the markets, investors said.