EU treaty will not 'place obligations' on UK, says PM

David Cameron has said a new treaty paving the way for closer fiscal co-operation among EU members will "not place any obligations" on the UK.

The prime minister said he believed a new treaty on budgetary rules set to be signed by 25 EU countries would not "encroach" on UK national interests.

But he said he would be watching the new arrangements "like a hawk".

He also said there had been "good steps" forward on promoting growth at Monday's EU summit in Brussels.

The Czech Republic has joined the UK by saying it will not sign an EU-wide agreement on budgetary co-operation but 25 other EU states are set to sign a new treaty, paving the way for closer fiscal union, as early as March.

'National interest'

Mr Cameron vetoed an outline accord in December, saying the UK had not got sufficient safeguards over the future workings of the single market and financial regulation affecting the City of London.

The UK has said it will not veto the use of EU-wide institutions by the new group but insists this must only be done with the consent of all 27 members.

The governent has also said it has "some legal concerns" about the use of the European Court of Justice to enforce the new rules.

At a press conference, Mr Cameron said the UK would not be "bound by" by the terms of the new treaty and while he wished the 25 countries well, the UK would be monitoring the new arrangements closely.

He said: "Our national interest is that these countries get on and sort out the mess that is the euro.

"It is also in our national interest that the new treaty - outside the EU - does not encroach on the single market or the things we care about.

"That is the outcome we want to achieve. We will be watching like a hawk and if there is any sign they are going to encroach on the single market then we will take appropriate action."

The UK has secured official observer status in negotiations over the fiscal pact, but critics have said that Mr Cameron has given up vital ground over access to European institutions.

"We have witnessed a U-turn by David Cameron on his previous stance of not letting those who have agreed to this new treaty use the various EU institutions," said Nigel Farage, leader of the UK Independence Party.

"The tough talk of December has faded away and he has revealed that he is not as tough on the EU as he would like us to think."

Industry row

The prime minister said enforcing tough budgetary rules across the EU would not solve its economic problems and more needed to be done to boost competitiveness and productivity.

Mr Cameron said EU leaders had made progress on measures to support growth and jobs including cutting tape, reducing barriers to digital investment and pursuing free trade deals.

However, the PM revealed that he had been at odds with French President Nicolas Sarkozy over the two countries' respective manufacturing strengths following comments by the French leader about the UK economy.

Mr Sarkozy was a "remarkable man", the prime minister said, and he was "full of admiration".

But he added: "Every now and again he says something I do not agree with. Today when he said Britain is short of industry... we have a larger industrial sector than France but we will gloss over that."

Although co-operating closer over the military campaign in Libya, the French and British leaders have not always seen eye-to-eye - with Mr Sarkozy reportedly calling Mr Cameron an "obstinate kid" in the wake of the UK veto.

After the summit, Mr Sarkozy said he expected a "definitive agreement" within the next few days over Greece's debts amid pressure on banks to write down the value of their Greek investments.