By George Parker, Alex Barker and Peter Spiegel, Financial Times
David Cameron and Nicolas Sarkozy were heading for a confrontation in Brussels on Thursday night over Britainâ€™s demand that any new treaty to enforce eurozone fiscal discipline also protect theÂ City of London.
The row added to a pessimistic mood as 27 European leaders arrived in Brussels for what is seen as a â€œmake or breakâ€ summit to try to stop theÂ eurozone crisisÂ worsening, and the French president warned Europe risked â€œdisintegrationâ€.
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French officials claimed the UK prime minister was making â€œunacceptableâ€ demands, while Jean-Claude Juncker, Luxembourgâ€™s prime minister, said he would not accept a deal that â€œallowed Britain to do what it wants in terms of financial regulationâ€. Strains were also evident between Germany, which wants tough new eurozone rules agreed by all 27 EU members, and France, which prefers a looser agreement among the 17 single currency countries.
Meanwhile pressure was also rising on Germany to agree additional resources to the eurozoneâ€™s rescue funds.
EU leaders pushed Angela Merkel, German chancellor, to accede to a plan to give theÂ International Monetary Fund â‚¬150bn (Â£128bn) in new fundsÂ that could be used to shore up eurozone countries, while allowing the blocâ€™s â‚¬440bn rescue fund to continue running even when a new â‚¬500bn facility comes into place next year. The latter measure would increase the size of the EUâ€™s own resources by about â‚¬200bn.
Mr Cameron is under pressure from his own Conservative party to take a tough stance in Brussels, but his list of demands falls well short of a British â€œopt outâ€ on new financial service regulation that Paris and Berlin believed he was seeking.
Some ofÂ Mr Cameronâ€™s eurosceptic MPsÂ will regard his approach as too timid. Edward Leigh, a Tory MP, caused fury in the prime ministerâ€™s camp when he said he was tired of British prime ministers returning from Brussels with â€œChamberlain-esque pieces of paperâ€.
â€œIâ€™m not sure that Britain is the problem,â€ said one senior European diplomat. â€œThere are still many unresolved issues between the eurozone countries.â€
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