Cameron threatens to veto EU treaty; Greece passes austerity budget

UK Prime Minister David Cameron has threatened to veto plans for an overhaul to the EU treaty on grounds it could damage British interests.

Cameron has said he will not agree to reform unless the safety of the City of London and the European single market are guaranteed.

A crucial EU summit is due to start tomorrow, and markets are hoping for a solution to the eurozone crisis.

Meanwhile Greece's parliament has approved its 2012 austerity budget designed to tackle the country's huge debts that first triggered the eurozone crisis.

The budget, proposed by the interim coalition government of former bank governor Lucas Papademos, includes further tax rises and spending cuts. Its announcement followed further public protests by Greek citizens.

The budget will cut Greece's deficit from a projected 9% to 5.4% and generate a primary surplus.

It is hoped the budget will restore the country's international credibility and create the conditions to rescue its troubled economy.

The scale of the planned fiscal union became clear this week as talks between German Chancellor Angela Merkel and French President Nicolas Sarkozy progressed this week. It includes proposals for the EU to have intrusive control of national budgets, and more centralised control of members' tax and spending decisions.

The two day Brussels summit will decide whether the new treaty will be signed by all 27 EU members or only by the 17 eurozone countries.

Cameron's objections could stop EU members from using the European Commission to enforce fiscal union, pushing Paris and Berlin to create government institutions outside the EU.

But comments from the European Council President Herman Van Rompuy presented a new dimension of the debate today after he said tougher rules to tackle the eurozone debt crisis can be achieved without changes to the treaties.

In a leaked report, he offers a fast-track "fiscal compact" that does not need lengthy ratification by parliaments or national referendums, the BBC reports.

The draft says tougher fiscal reforms can be adopted simply by amending a protocol - a procedure that needs national consensus but does not require substantial changes to the EU treaties.

Van Rompuy argued this would speed up the implementation of reforms and remove any potential political complications.