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European Commission President Jose Manuel Barroso speaks during a press conference following a working session of an European Union summit at the EU headquarters on December 9, 2011 in Brussels.


José Manuel Barroso, the European Commission president, on Tuesday sided with critics of Britain's negotiating strategy, saying the demands made by David Cameron to protect the U.K.'s financial services industry could have undermined rules governing the European Unions's common market.

"The United Kingdom, in exchange for giving its agreement, asked for a specific protocol on financial services which, as presented, was a risk to the integrity of the internal market," Mr. Barroso said at his regular post-summit appearance before the European Parliament in Strasbourg. "This made compromise impossible."

Mr. Barroso sought to put the split in a positive light, saying he was most pleased that there were no deep divisions between the 17 euro zone countries and the rest of the nine euro "outs" - a clear reference to French president Nicolas Sarkozy's desire for a "two-speed Europe" that excluded non-euro members.

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"This was the greatest risk ahead of the summit," he said. "This is not an agreement at 17-plus, but an agreement at 27-minus."

On Monday Mr. Cameron defended his use of the British veto at last week's European Union summit as in the "national interest", but the strains placed on his coalition government were laid bare when his deputy, Nick Clegg, refused to sit alongside him in the House of Commons.

Mr. Clegg, leader of the pro-European Liberal Democrats, claims the veto was bad for British business and would leave the UK isolated. But the prime minister was cheered by Tory MPs who claimed he had shown "bulldog spirit".

Mr. Cameron's refusal to agree an EU treaty change to reinforce euro zone fiscal discipline in the absence of safeguards for the City of London continues to cause anger across Europe. That could be further inflamed by Britain's refusal to take part in an urgent €200-billion funding boost for the International Monetary Fund to tackle the crisis.

A euro zone statement issued at the Brussels summit said the 17 euro area members and "other member states" would consider and confirm within 10 days the provision of the extra funds in the form of bilateral loans.

The Treasury said that any extra British funding would be part of a wider global effort - possibly agreed through the G20 next year - and could not be a substitute for the euro zone doing its part to resolve the crisis.

Hillary Clinton, U.S. secretary of state, said the British veto would not affect US dealings with either the U.K. or the EU. "Our concern has not been over the position that the U.K. has taken, it's whether the decisions made by other members of the euro zone countries within the EU will work," she said.

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The split with Britain has distracted attention from the fact that the separate treaty agreed by up to 26 EU members has not settled market nerves.

The euro, equities and bonds tumbled amid fears of mass downgrades of euro zone government debt and growing doubts about the agreement. The euro dropped to a two-month low against the dollar while Italian equities fell 3.8 per cent.

In an attempt to heal the rift with Mr. Clegg, Mr. Cameron's House of Commons statement was conciliatory in parts and included a promise that he would have an "open mind" on suggestions the signatories to the new treaty could have access to EU institutions like the European Court of Justice and European Commission to enforce fiscal discipline - a softening of the previous British position.

Ed Miliband, Labour leader, asked whether Mr. Cameron's statement meant he had achieved anything in Brussels, other than to leave Britain "without a voice".

Olli Rehn, the EU's economic chief, added his voice to critics of the British decision, saying it risked putting the U.K. "on the sidelines" of European decision-making. Mr. Rehn added that the decision would not shield the City of London from any EU financial regulations.

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