Cameron denies backing down on EU as he raises legal threat

The Prime Minister was derided by Labour after it emerged that key EU institutions could be used to enforce the new fiscal pact.

But he insisted the arrangements between 25 member states would not damage Britain’s national interest – and that the Government could take legal action if it did.

The UK blocked a full treaty of all 27 countries setting rules for eurozone fiscal discipline at the December summit of the European Council.

The Czech Republic joined Britain in saying it would not sign up to the deal, expected to be finalised in March.

As he reported back to the Commons on the outcome of the latest summit, the premier faced mockery from Ed Miliband.

Mr Cameron had originally promised that EU institutions such as the European Commission and European Court of Justice would not be allowed to support the new agreement, the Labour leader said.

“With this Prime Minister, a veto is not for life, it’s just for Christmas,” he joked. “He said it was a real veto on the use of EU institutions and his backbenchers believed him, even his Cabinet believed him.

“On the European court, on the Commission, on the buildings, the phantom veto of December is now exposed.”

Mr Miliband also rejected Mr Cameron’s claims there was no new European treaty because he had vetoed it.

“It talks like a European treaty, it walks like a European treaty, it is a European treaty,” he said. “And for Britain he has secured absolutely no protections at all.”

Mr Cameron said, however that some use of the institutions by the group of 25 was already permitted by existing EU treaties.

“I made clear we will watch this closely and if necessary we will take action, including legal action, if our national interests are threatened by misuse of the institutions,” he said.

Mr Cameron added: “This is a treaty outside the EU. We are not signing it, we are not ratifying it, we are not part of it, and it places no obligations on the United Kingdom. It doesn’t have the force of EU law for us, nor does it have the force of EU law for the EU institutions, nor does it have the force of EU law for the countries who sign it.”

The Prime Minister also issued a warning to France yesterday that the UK could reap the benefit if it went ahead with a national levy on bank transactions.

He said Britain’s door would be open to any French banks wishing to leave the country to avoid paying the Financial Transactions Tax (FTT) that French president Nicolas Sarkozy has vowed to introduce if he is re-elected in May.

The Prime Minister and Chancellor George Osborne have insisted the FTT can only function if is applied globally, to ensure a level playing field in the banking sector. They have refused to take part in a tax at EU level for fear of driving European banks to trade outside the union’s jurisdiction.

“If France goes for it, then the door will be open to many more banks from France, and we would welcome them to the UK,” vowed Mr Cameron.

As both internal and external squabbles over Europe continued it also emerged that crisis-hit Greece has all but concluded a crucial deal to write off half its privately-held debt.

Finance Minister Evangelos Venizelos said: “We are one step –I would say it is a formality – away from finalising” the debt relief agreement.

He added he hoped finance eurozone ministers can sign off on the new cuts – and a new bailout – when they meet next Monday.