Britain stays out of EU financial crisis deal
David Cameron: ''What is on offer isn't in Britain's interests''
David Cameron has refused to join an EU financial crisis accord after 10 hours of negotiations in Brussels.
Mr Cameron said it was not in Britain's interest "so I didn't sign up to it".
But France's President Sarkozy said his "unacceptable" demands for exemptions over financial services blocked the chance of a full treaty.
Of the 27 EU members Britain and Hungary look set to stay outside the accord, with Sweden and the Czech Republic having to consult on it.
A full accord of "wasn't possible, given the position of our British friends," President Sarkozy said.
The BBC's political editor Nick Robinson said the consequences "could scarcely be greater for Europe and for Britain's relationship with Europe".
Mr Sarkozy said the eurozone countries would sign an intergovernmental accord aimed at stabilising the currency in the face of the debt crisis, plus any other EU members that wanted to join.
Speaking in a press conference following the meeting he said: "The countries that have remained outside are Hungary and Britain, and the countries that have to consult with their parliaments are the Czechs and the Swedes."
Mr Cameron told a press conference: "We want the Eurozone countries to come together and solve their problems. But we should only allow that to happen within the EU treaties if there are proper protections for the single market, for other key British interests.
'Coalition breaker'
"Without those safeguards it is better not to have a treaty within a treaty, but have those countries make their arrangements separately.
"It was a tough decision but the right one."
Mr Sarkozy said the exemptions Britain proposed were unacceptable because a lack of sufficient regulation had caused the current problems.
The head of the European Central Bank, Mario Draghi, said the planned accord would lead to much more discipline in economic policy.
But the BBC's Nick Robinson said there will now be a series of "angry rows and legal challenges about what this new euro club within a club can and can't discuss, and whether it should be allowed to use EU resources and officials".
Our correspondent said the safeguards for the City of London which Mr Cameron fought for but didn't win will also be the focus of a "protracted fight".
"Many eurosceptics will now demand a wholesale renegotiation of our membership of EU and a referendum on it - something which would be a coalition breaker.
This veto is not the end of something, it is the beginning of a story who's end is quite unpredictable," he said.
Good deal
A 45-minute meeting between David Cameron, the French president and the German chancellor earlier broke up without agreement.
Sources say there was "no movement" with each side setting out their respective positions.
The prime minister had said he has two aims: stability for the euro and protecting Britain's interests.
Speaking before the summit, Mr Cameron he said he would have "no hesitation" in vetoing a proposed new European Union treaty if it did not offer a "good deal" for the UK.
Some senior Conservatives say any big changes should go to a UK referendum.
Others want the prime minister to do more to reshape the UK's relationship with the EU by taking back specific powers.
France and Germany want a new EU treaty enshrining stricter fiscal rules for the 17 member states that use the euro.
Mr Sarkozy and Mrs Merkel have called for much closer co-operation among eurozone members, including budgetary oversight, common corporation and financial transaction taxes.
Mr Cameron had said he would exact "a price" for UK support for any treaty change which requires the support of all 27 EU members and wants safeguards on financial regulation and for the single market, in the event of closer fiscal integration in the eurozone.
Britain has been critical of suggestions of EU-wide financial controls which might affect the City of London.
"In return for the treaty that they want - to sort out the problems of the eurozone - I want to make sure we get a good deal for Britain, we keep our markets open and we have the power here in the UK to make sure that our top industries are properly promoted and enhanced," Mr Cameron said earlier.
