UK to keep trade links with Europe

David Cameron insisted his top priority is protecting trade within the single market, as Tory eurosceptics raised fears that those in the currency bloc will “gang up” against the others – described as caucusing.

The Prime Minister said that work was already under way in Whitehall on the balance of powers between Westminster and Brussels but the “key national interest” was keeping markets open among the 27 member states.

He said he was working to ensure safeguards were put in place to protect all 27 member states should, as the UK wants, the 17 Euro countries introduce tighter fiscal integration.

Mr Cameron said: “There are a lot of things the eurozone is doing together. Having more meetings alone, establishing machinery – it raises the question of could there be caucusing?

“It is very important that the institutions of the 27 are properly looked after and that the commission does its job as the guardian of the 27.”

The Prime Minister also warned that the City of London faced increasing pressure and required protection.

Speaking in Australia, where he is attending a Commonwealth summit, he said: “London is the centre of financial services in Europe.

“It’s under constant attack through Brussels directives.

“It’s an area of concern, it’s a key national interest that we need to defend.”

Asked what the attacks were, Mr Cameron said it was “a mixture of things”, including “badly drafted, badly formed” regulations.

The European summit in Brussels reached agreement on a package which means the banks will take a 50 per cent write off on their Greek debt holdings.

The European Financial Stability Facility (EFSF) is to be leveraged to 1 trillion euro (£880bn).

Billions will also be pumped into vulnerable banks to protect them from failure.

Chancellor George Osborne has moved to reassure Tory backbenchers by pledging that UK money would not be earmarked to bail out the struggling single currency area.

Deputy Prime Minister Nick Clegg insisted there was “no question” of unilaterally repatriating powers from Brussels and claimed plans for rebalancing the relationship with Britain were a long way off.

He also argued that Britain was “entirely within its rights” to defend its economic interests, but the way to do that was “by making sure you have a loud British voice at the top table”.

“One of the ways we can do that is not by cowering on the sidelines but by actively arguing for open, competitive, liberalisation in the single market, which is after, all the world’s largest borderless single market,” he said.

“There are a number of new regulations and laws which have been proposed at EU level for the city of London, some of which are entirely sensible and some are less sensible.

“That’s why we need to constantly engage with other European Union countries to get these laws right.”

Meanwhile the head of Europe’s bailout fund also sought financial support from China to help resolve the bloc’s debt crisis.

Klaus Regling, chief executive of the EFSF, said that while no quick deal was in sight, he was still confident Beijing would keep buying bonds issued by his fund.

European leaders are under pressure to finalise the details of the bailout plan in order to gain support from China and others.