Chancellor George Osborne has raised the prospect that Britain could leave the European Union unless there is change in Brussels.
In an interview with the German Die Welt newspaper, the Chancellor said he very much wanted the UK to continue as an EU member state.
However, he made clear that in order for that to happen, there would have to be meaningful reform of the current arrangements.
"I very much hope that Britain remains a member of the EU. But in order that we can remain in the European Union, the EU must change," he said.
A Treasury aide insisted his comments were fully consistent with the Government's position - that the EU needs to change "and indeed is changing".
However, the fact such a senior member of the Government is prepared publicly to discuss the possibility Britain may be unable to stay in the EU is likely to be welcomed by Tory eurosceptics who have been pressing for an in-out referendum on Britain's membership.
Mr Osborne made his comments during a visit to Berlin on Tuesday, although they have only just been published.
On Thursday a key ally of German chancellor Angela Merkel issued a sharp warning that any attempt at "blackmailing" member states into accepting change would backfire on Britain. Bundestag European affairs committee chairman Gunther Krichbaum said a referendum could leave the UK isolated in Europe. "You cannot create a political future if you are blackmailing other states. That will not help Britain," he said.
UKIP leader Nigel Farage said: "Mr Osborne says that the British people are disappointed with the EU, which is true, but what he will not recognise is that they are far more disappointed with the British political class who repeatedly refuse to give them a choice about it."
He added: "Telling a German newspaper that the EU needs to change is ironic. After all, it is the changes planned by Germany that in the end are making our membership of the EU impossible. It is the Germans who are demanding greater central control; it is they who are demanding that the EU runs financial and economic policy; and it is the Germans who have put such horrific sanctions on southern Europe that millions are being made unemployed."