Following the dark threat of a credit downgrade from US ratings agency Standard and Poor's, European leaders received another warning on Wednesday, when British Prime Minister David Cameron set out London's agenda ahead of a crucial summit on the euro currency crisis in Brussels.

In an editorial article in the British Times newspaper, Cameron threatened to block any attempts to open re-negotiations on the European Union treaty if London's demands were not met at the meeting, scheduled for Thursday and Friday.

Under legislation passed last year, Britain must hold a referendum if any transfer of power takes place between Brussels and London.

Warning shot

Hardening his rhetoric against the EU, Cameron said Britain's huge financial sector, based in the City of London, would have to be safeguarded if he were to sign up to a new treaty designed to shore up Europe's ailing single currency.

"The most important British interest right now is to sort out the problem in the eurozone that is having the chilling effect on our economy," he said. "That obviously means eurozone countries doing more together and if they choose to use the European Treaty to do that, then obviously there will be British safeguards and British interests that I will want to insist on."

Sarkozy and Cameron had an unseemly spat the last time they met in Brussels

Lines in the sand

"This doesn't surprise me at all - it's just the early stage of bargaining ahead of a big summit," commented Iain Begg, associate fellow at Britain's Chatham House think tank.

"A new treaty could include regulation that governs how the banking section operates, which would impact how the City operates," Begg told Deutsche Welle.

Cameron's threat could throw cold water on the idea of a wholesale treaty reform - since that requires the agreement of all 27 EU states – and therefore increases the likelihood that France and Germany will end up pushing for an agreement between just the 17 nations who use the euro – circumventing Cameron's veto.

Ulrike Guerot, senior policy fellow at the European Council on Foreign Relations (ECFR) thinks it's high time that the UK faces this discussion.

"To be honest, I like it," she told Deutsche Welle. "It is now clear that France and German are deeply committed to saving the euro, and they've decided they want to do it by greater fiscal integration. They will move ahead with that whether the Brits want it or not."

"You cannot allow the most hesitant member of the club to decide on the fiscal integration of the whole club," she added.

Hard but soft

Other analysts think Cameron's article sets up a summit that will have to address inherent tensions in the eurozone.

To keep Britain and other largely euroskeptic countries on board, Sarkozy and Merkel will have to frame a new budget oversight law that will be "less prominent legally" than a major treaty revision, according to Jan Techau, director of the Brussels-based Carnegie Europe think tank.

"They are suggesting a mechanism that leaves the full sovereignty of the parliaments untouched, but de facto there would be control," he said. "It will be a diplomatic highwire act, because they have to come up with language that is substantial enough to calm the markets and soft enough to calm the euroskeptics."

Merkel and Sarkozy have decided there's only one way to heal the euro: fiscal integration

Entente not-so cordiale

Cameron's remarks are likely to anger under-fire eurozone leaders as they scramble to come up with a convincing rescue plan after the Franco-German proposal was overshadowed by S&P's threat of a debt downgrade.

Cameron and Sarkozy are currently not exactly on the best of terms anyway, after the two clashed at another EU summit in October. According to a report in the Guardian newspaper, that meeting was held up for two hours after the French president expressing outrage at the constant criticism and lectures from UK ministers.

"You have lost a good opportunity to shut up," Sarkozy is said to have told Cameron. "We are sick of you criticizing us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings."

Wind in euroskeptic's sails

The British leader is also under pressure from the euroskeptic wing of his Conservative party to use the reopening of EU treaties to claw back powers from Brussels. Many of his own party want Cameron to use Thursday's summit to weaken Britain's ties with the EU.

Writing in a Conservative party blog, euroskeptic MP Stewart Jackson wrote, "People will not understand if our prime minister fails to take advantage of the unique generational opportunity and congruence of events to press British interests and, more specifically, recast a whole new more mature and looser relationship with the European Union, in the event that the eurozone countries head off towards a children's crusade of 'fiscal discipline.' "

Nigel Farage, leader of the strongly euroskeptic UK Independence Party (UKIP), claimed recently that some Conservatives were thinking about defecting to his party, even though it has no seats in the House of Commons and won just 3 percent of votes in the 2010 election. But recent UK polls suggest that UKIP currently enjoys the support of as much as 7 percent of the British electorate.

Author: Ben Knight

Editor: Andreas Illmer