Cameron had made "unacceptable" demands for exemptions for the UK over financial services.

David Cameron has effectively vetoed an EU-wide treaty change to tackle the eurozone crisis, saying it was not in the UK's interests.

Instead a new "accord" setting out tougher budget rules will be drawn up for the eurozone and at least six other EU states which intend to join it.

France's Nicolas Sarkozy said the UK PM had made "unacceptable" demands.

UK Foreign Secretary William Hague denied the move would leave the UK isolated in Europe.

He said signing up to a change to the Lisbon Treaty - the treaty which governs the running of the EU - would have meant giving up more national sovereignty.
National budgets

But Labour leader Ed Miliband wrote on Twitter that the outcome was "a sign of weakness from David Cameron": "Why did he fail to build alliances before the summit?"

Nearly 10 hours of overnight talks could not produce an agreement involving all member states, but the 17 eurozone countries and at least six other EU states - who are expected to join the euro in the future - are expected to sign up to the new deal, which includes:
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a commitment to "balanced budgets" for eurozone countries- defined as a structural deficit no greater than 0.5% of gross domestic product - to be written into national constitutions
automatic sanctions for any eurozone country whose deficit exceeds 3% of GDP
a requirement to submit their national budgets to the European Commission, which will have the power to request that they be revised

French President Nicolas Sarkozy said Mr Cameron had made "unacceptable" demands for exemptions for the UK over financial services.

The UK has long resisted calls from other EU leaders for a Europe-wide tax on financial transactions - a so-called Tobin tax - which it argues would hit the City of London disproportionately.

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