Reform EU or Britain may quit warns Osborne

In an interview with the German Die Welt newspaper, the Chancellor said that he very much wanted the UK to continue as an EU member state.

However he made clear that in order for that to happen, there would have to be meaningful reform of the current arrangements.

“I very much hope that Britain remains a member of the EU. But in order that we can remain in the European Union, the EU must change,” he said.

A Treasury aide insisted that his comments were fully consistent with the Government’s position – that the EU needs to change “and indeed is changing”.

However the fact such a senior member of the Government is prepared publicly to discuss the possibility Britain may be unable to stay in the EU is likely to be welcomed by Tory eurosceptics who have been pressing for an in-out referendum on Britain’s membership.

Mr Osborne made his comments during a visit to Berlin on Tuesday, although they have only just been published.

A key ally of German chancellor Angela Merkel issued a sharp warning that any attempt at “blackmailing” member states into accepting change would backfire on Britain.

Bundestag European affairs committee chairman Gunther Krichbaum said a referendum could leave the UK isolated in Europe.

“You cannot create a political future if you are blackmailing other states. That will not help Britain,” he said.

Meanwhile the US assistant secretary for European affairs, Philip Gordon, has made clear the Obama administration wanted “a strong British voice” in the EU and referendums risked turning countries “inward”.

Downing Street said yesterday that David Cameron had talked Barack Obama through Britain’s approach to Europe when they spoke before Christmas and that the president was supportive.

“We want to change our relationship with the European Union and seek consent on that,” the Prime Minister’s official spokesman said.

“He (Mr Obama) was supportive of the approach that the Prime Minister set out.”

Mr Cameron is due to spell out his position more fully in a keynote speech later this month.

Bill Cash, the eurosceptic Tory MP who chairs the European Scrutiny Committee, criticised Mr Krichbaum’s intervention, insisting Britain was entitled to debate the issue “on our own terms”.

Speaking on BBC Radio 4’s The World At One, he said Britain’s position on the EU had got to be “straightened out”.

“There are profoundly good reasons for us to have a referendum and there are 35 million people in this country who have never had the opportunity to express their views on the subject.

“This is about democracy and it’s about our relationship with the EU and we will have our say, we will have our debate, and we will do it on our own terms.”

Mr Cash added that Mr Krichbaum’s comments “should not have been made”.

“We have every right to have our own referendum; we have our own right to determine what kind of country we will be and in relation to the EU there is no question that the status quo is unacceptable.”