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A news story about British Prime Minister David Cameron is broadcast on a TV screen at the stock market in Frankfurt, Germany, Monday, Dec. 12, 2011, when the German stock index DAX went down more than 2 per cent.Michael Probst

Prime Minister David Cameron defended his decision to break with European partners by vetoing a change to the EU treaty, insisting on Monday that remaining a member of the 27-nation bloc was in Britain's national interest.

"Britain remains a full member of the EU and the events of the last week do nothing to change that. Our membership of the EU is vital to our national interest. We are a trading nation and we need the single market for trade, investment and jobs," Mr. Cameron told parliament during a noisy debate on last week's European Union summit.

"We are in the EU and we want to be," he said.

Mr. Cameron's decision not to take part in an EU treaty change aimed at tightening fiscal rules for countries using the euro has isolated Britain in the 27-nation bloc and created the biggest rift in his coalition since he took power in May 2010.

The prime minister's ambiguous answers on Friday to questions over Britain's future membership of the EU sparked speculation that the U.K. may now be contemplating a future outside the EU, although analysts say that would damage Britain's economy.

Mr. Cameron said the choice he had faced was a treaty without proper safeguards for Britain's important financial services industry or no treaty. "The right answer was no treaty," he said. "It was not an easy thing to do but it was the right thing to do."

Mr. Cameron's decision won praise from euro skeptics on the right wing of his Conservative Party but brought a backlash from his pro-European Liberal Democrat coalition partners.

Mr. Cameron's deputy Nick Clegg, the Lib Dem leader, said on Sunday he was "bitterly disappointed" with the outcome of the summit, which he said was "bad for Britain."

Mr. Clegg, who had endorsed the decision just days ago, leads the pro-European Liberal Democrats, the junior partners in an uneasy alliance which has vowed to rule until the next election due in 2015.

Despite his emerging anger, Mr. Clegg said it would be an "economic disaster" were the coalition - which has imposed harsh spending cuts to fight a record budget deficit - to fall apart now, when the economy is teetering on the edge of recession.

He was not on the government benches in parliament on Monday and opposition Labour legislators called out "Where's Clegg?".

The Liberal Democrats have seen their poll ratings more than halve to just over 10 per cent since the election, and Mr. Clegg knows that a snap poll would leave them facing another long spell in the political wilderness.

Labour leader Ed Miliband echoed Mr. Clegg, saying in parliament on Monday that the veto was "bad for business, bad for jobs and bad for Britain."

French President Nicolas Sarkozy joined the critics, telling Le Monde newspaper he and German leader Angela Merkel had done everything they could to "ensure Britain was on board with this accord", implying Mr. Cameron had deliberately scuppered it.

And the EU Economic and Monetary Affairs Commissioner Olli Rehn said Mr. Cameron's decision was as much a matter of regret for the British people as it was for Europe.

"We want Britain to be at the centre of Europe and not on the sidelines," he told reporters in Brussels.

At the Brussels summit on Friday, Mr. Cameron vetoed a plan for a new EU treaty that would impose closer EU control over national government budgets to curb the bloc's debt crisis. Mr. Cameron said the proposed deal risked exposing London's powerful financial services industry to unwelcome EU regulation.

The other member states, including the 17 using the euro, now plan to adopt a separate pact without Britain, leaving the island nation potentially alone as never before in the EU, a club it joined in 1973 but which Britons have long viewed with distrust.

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