David Cameron faces UK coalition tensions after EU split

Prime Minister David Cameron can expect a hero's welcome from his Conservative party but faces a backlash from Liberal Democrat allies on Monday when he explains a European Union veto that has cast Britain adrift from its continental partners.

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.

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

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, 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.

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

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 Cameron had deliberately scuppered it.

Britain on the sidelines

And the EU Economic and Monetary Affairs Commissioner Olli Rehn said 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.

Cameron's ambiguous answers on Friday to questions over Britain's future membership of the EU have sparked speculation that the UK may now be contemplating a future outside the 27-nation bloc, although analysts say that would damage Britain's economy.

At the Brussels summit on Friday, 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. 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.

Cameron will address parliament at 1530 GMT on Monday afternoon to explain the outcome of the summit.

"Basically he'll reiterate what he's said over the last couple of days about why he did what he did and why he thought it was the right thing to do," said a spokesman for his Downing Street office.

"Britain is not a member of the euro. What they were debating about is how they are organized to make sure that the euro works," he added. "In terms of other types of policy, defense, all sorts of other policy, Britain will still be very much at the centre of things."

"Bulldog spirit"

Conservative eurosceptics in parliament had last week sent Cameron on his way to Brussels with a plea to show some "bulldog spirit" by standing up for Britain.

His stance appears to have gone down well at home where many Britons accept the popular press depiction of the EU as a bloated bureaucracy which ties Britain up in red tape.

A poll in The Times newspaper on Monday said 57 percent of Britons believed Cameron was justified in using Britain's EU veto, while only 14 percent opposed the move.

However, reaction across the Channel was hostile.

"I think the English right has shown it is capable of being the world's stupidest, in serving purely financial interests and not the national interest," said Jean-Pierre Jouyet, head of France's financial sector regulator.

"That's regrettable because we need our British friends in Europe."

A former public relations executive, Cameron will need all his presentational skills to get the tone right on Monday.

"If he comes back trying to present this as triumphalist, as some kind of victory for the 'bulldog spirit', I think that will go down badly with Lib Dems," said Liberal Democrat parliamentarian Martin Horwood.

"There is a very united tone within the Lib Dems, and it is overwhelmingly one of disappointment at the outcome," he told Reuters.

Europe has long been a toxic issue for the Conservatives, having divided the centre-right party in the 1990s when it was last in power.

Eighty-one Conservative parliamentarians - more than a quarter of the total - defied Cameron in October and backed calls for a referendum on Britain's EU membership.