Britain Isolated As Cameron Uses Veto

They have agreed to disagree before - most notably over the Iraq War - but this is the first time that the European Union has split apart on a fundamental issue.

On one side, the vast majority of EU members: 23 countries out of a total of 27, including all 17 eurozone members, five Euro applicant countries, and Denmark - which has an opt-out like Britain, but which is under new management with a left-of-centre government.

On the other side, four EU members, none of which belongs to the single currency: Britain, Hungary, the Czech Republic and Sweden.

Although David Cameron has good relations with the other three leaders, this is in no sense a solid alliance - the Czechs and the Swedes are reserving their position subject to consulting their domestic parliaments.

Britain's new isolation centres on the City of London.

The UK alone accounts for more than half of the EU's financial services industry, so it would have been hit disproportionately by any European curbs on its activities.

As David Cameron put it to a 6am news conference after the break up of all-night negotiations: "If I couldn't get adequate safeguards, I wouldn't agree (to it)... this (fiscal compact) is not in Britain's interests."

President Nicolas Sarkozy , who faces a re-election battle in France in May 2012, was quick to point the finger of blame at perfidious Albion, insisting that the UK could not be "an exception", and had to be put aside if it would not comply with the new agreement.

But the British Prime Minister claimed it was the others who had changed, not him.

He continues to stand by existing EU rules and says he will not allow institutions such as the European Court of Justice to be used to police the new eurozone rules.

Mr Cameron brushed aside my suggestion that he should consult either the British parliament or people (in a referendum) on the new settlement, arguing that the EU already accommodates variable geometry with different groups of members belonging to different organisations such as Nato and the Schengen open borders arrangement.

Given the mood of eurosceptic dissent in Tory ranks, this is probably a good outcome for Mr Cameron as far as his own party is concerned, although he will come under pressure to further consolidate the UK's newly-detached position.

Roger Helmer, the Conservative MEP, immediately sent out the Twitter message: "Credit where it is due. Cameron has shown some backbone in Brussels. Now need to talk repatriation + disengagement."