Q&A: David Cameron and the EU summit on the eurozone

UK Prime Minister David Cameron has effectively vetoed an EU-wide treaty change aimed at tackling the eurozone crisis, saying it was not in Britain's interest. Here is a guide to the position he finds himself in.

What has happened?:

UK Prime Minister David Cameron says he has blocked changes to the EU's Lisbon Treaty which would affect all 27 member states because it was not in Britain's interests. Instead the 17 EU countries which use the euro, and nine other EU states, most of whom intend to join the single currency in future, will press ahead with a separate agreement - called an "intergovernmental accord" - aimed at preventing a repeat of the current debt crisis.

Why did David Cameron refuse to sign up?

Before the summit, Mr Cameron said he would not sign up to any change involving all 27 member states that did not protect British interests - particularly on financial services and access to the single market. The UK has long been resisting calls from other EU leaders for a Europe-wide bank transactions tax which it says would hit the City of London hardest. It is not thought such a tax was specifically discussed but Mr Cameron sought a separate legally-binding "protocol" to protect the City of London from more EU financial regulations. He didn't get one. France's Nicolas Sarkozy argued that much of the financial crisis was down to a lack of regulation and it would not have been right to give the UK a "waiver".

What else did the UK government demand?

Mr Cameron also wanted an agreement that the European Banking Authority would remain in London, protection for US financial institutions based in London that do not trade with the rest of Europe, and an agreement that any changes - including a financial transactions tax - would require the unanimous backing of all EU members. He didn't get any of those either.

Who is to blame?

French President Nicolas Sarkozy has laid the blame squarely at Mr Cameron's door. He says he would have preferred a deal involving the 27 EU states but that wasn't possible "thanks to our British friends". But the UK government says it was not asking for anything unreasonable. Foreign Secretary William Hague said EU leaders had made "nothing like enough of an effort" to meet UK concerns. Deputy PM Nick Clegg, whose Liberal Democrat party is much more pro-European than their Conservative coalition partners, said the UK's demands had been "modest" and affected the single market as a whole, not just the UK. Labour say the PM failed to build alliances in Europe ahead of the summit and has achieved nothing that will protect the City of London.

What happens now?

It looks like all other EU states will join a new fiscal arrangement aimed at stopping a repeat of the eurozone debt crisis. For eurozone countries, it means they will have to enshrine in their own national constitutions tougher budget rules which were in the Maastricht treaty, but have since been broken. These include an agreement that structural budget deficits never exceed 0.5% of gross domestic product (GDP), sanctions for those whose deficit exceeds 3% of GDP and a requirement that they submit their national budgets to the European Commission. The non-eurozone countries will not be immediately effected - but most intend to join the euro eventually. Denmark has an opt-out of euro membership and Sweden has said it has no plans to join in the near future.

What does this mean for the UK?

The Labour Party say Mr Cameron's decision will leave the UK isolated in Europe - outside an EU club that is making the big decisions which will affect the UK - and has done nothing that will protect the City of London from increased financial regulation emanating from Europe. But Eurosceptic Conservatives believe it should be the beginning of efforts to start completely renegotiating Britain's relationship with the European Union. Foreign Secretary William Hague rejected the idea that there would be a "two-speed Europe" - as there were other groups within the EU, like the Schengen arrangement, that cooperated on different subjects. He said by stopping a full treaty change, key decisions on issues like the single market would still have to be made by the full 27 EU members. For a full brief on the financial and economic implications for the UK, click here.

What does it mean for David Cameron? And the coalition?

The UK prime minister has faced a difficult balancing act on Europe - at the head of an increasingly Eurosceptic party in coalition with the pro-European Liberal Democrats. His stance has been backed by some of his Eurosceptic backbenchers, but they may yet press him to hold a UK referendum on the changes, by arguing the new "fiscal compact" still amounts to a big change that will affect the UK - something the government has been insisting will not be necessary. Labour have accused Mr Cameron of pandering to his backbenches, rather than fighting for the UK's interests.

Separately there may be some disquiet on the Lib Dem benches. Deputy PM Nick Clegg said the veto was "bad for Britain" and could leave the UK "isolated and marginalised". He said he believed the PM was pushed into "a very difficult position" by his own backbenchers, as well as France and Germany, but he had made it clear to Mr Cameron it was "untenable" for him as Lib Dem leader to welcome the decision to veto.

Others are also unsure about Mr Cameron's actions - Lib Dem MEP Sharon Bowles said she was "gutted" and predicted "revenge attacks" by other EU states. Former Lib Dem leader Lord Ashdown called the veto a "catastrophically bad move".

Mr Cameron's stated priority at the summit was for an end to the euro debt crisis, which he says is having a chilling effect on Britain - so ultimately its long-term impact will depend on whether this week's deal succeeds in pleasing the financial markets and boosting growth.