Cameron ready to walk away from EU summit if UK demands are not met
David Cameron has told EU leaders he is ready to walk away from a crunch Brussels summit without a deal on Friday unless they give ground on key British demands and provide him with a "credible" package he can sell to voters in the upcoming referendum.
The Prime Minister urged fellow leaders to agree a new "live and let live" settlement which could resolve the "festering" problem of Britain's relationship with Europe for a generation.
But as the first session of talks broke up after two and a half hours, a Downing Street source said there was little sign of narrowing in differences over a number of key issues like migrant welfare, relations with the eurozone and the requirement for "ever-closer union".
With officials preparing for a tough night of bargaining before leaders return to the negotiating table at breakfast-time, the possibility remained that a summit described as "make or break" by European Council president Donald Tusk could end without a breakthrough, almost certainly delaying a referendum until after the summer.
"The Prime Minister left them in no doubt that we are only going to do an agreement at this summit if we make some real progress from where we were at 8.30 this evening," said the Number 10 source. "If we don't, we are not going to have an agreement at this summit.
"There is some real hard work to do overnight and we have got to see real progress."
Despite a string of European leaders, including German Chancellor Angela Merkel, saying they were ready to be constructive about finding a resolution to Britain's concerns, the Downing Street source said Mr Tusk shared the PM's assessment that more movement was needed to secure a deal.
"While many countries said they wanted to help keep Britain in the EU, there wasn't much sign of how they are planning to do that in practice," said the source.
Mr Cameron was meeting Mr Tusk after the summit dinner to discuss the work that was needed overnight, and was ready to talk to other leaders.
The Prime Minister's plea came as other EU states demanded a "no second chance" agreement to make clear to Britain that Europe will not come back with a better offer if it votes to Leave.
Belgium - backed by France - moved to pre-empt the possibility of a second UK referendum by proposing that the summit conclusions should state that any agreement reached this week will not be amended if Britain votes to leave the EU.
The move is designed to quash the idea, backed by some Eurosceptics and reportedly floated privately by London Mayor Boris Johnson, that a Leave vote would give the UK leverage to extract further concessions from the EU before a second poll.
Meanwhile, Britain's line on key welfare measures appeared to be hardening.
It is understood the PM has set his face against calls from eastern Europe for child benefit cuts to be imposed only on new migrants with offspring living in their home country.
Mr Cameron wants the new system - under which payments would be made at the lower rates of the migrant's homeland - brought in quickly and believes it is not acceptable for it effectively to be phased in over 16 years as the children of 34,000 existing claimants in the UK reach adulthood.
UK officials declined to comment on reports that the PM was asking for a proposed "emergency brake" on in-work welfare payments to EU migrants to last for seven years, with the option to extend it twice by a further three years to a total of 13.
Addressing fellow leaders at the start of the two-day summit, Mr Cameron said the question of Britain's relationship with the EU had been "allowed to fester for too long" and it was time to deal with it.
And he told them he needed a package that would be "credible" with the British people and strong enough to persuade them to vote to remain in the EU.
The 28 leaders at the European Council had the chance to "settle the issue for a generation" and move to a "fundamentally different" relationship with Britain, he said.
The new arrangement on offer would be a "live and let live" settlement under which states which want to integrate further will be free to do so, while those which do not can rest assured their interests will be protected, said Mr Cameron.
This would be "a big prize" for every nation in Europe, he told his fellow leaders.
Arriving at the summit, French President Francois Hollande left no doubt there were limits to the compromises he would accept.
"No country must have a right of veto, no country must exempt itself from the common rules or common authorities," said Mr Hollande.
"It's the European Union that's at stake, not simply one country of the European Union.."
But European Commission president Jean-Claude Juncker said he was confident outstanding differences would be resolved and "convinced" the UK would remain a "constructive and active" member of the EU.
If a deal is reached on Friday, Mr Cameron is expected to call a special Cabinet meeting to endorse the agreement and set a referendum date - widely expected to be June 23.
He would also grant Eurosceptic Cabinet colleagues like Iain Duncan Smith and Chris Grayling the freedom to campaign for Britain to vote Leave.
Ukip leader Nigel Farage dismissed the package on offer in Brussels as "pretty shameful", telling the Press Association: "Whatever he comes back with and tries to sell to the British people is not legally binding. It can be struck down by the European Parliament and ultimately all of it can be ruled out of order by the European Court of Justice.
"It's rather like him saying to the British people, 'I'd like you to buy this car, but you can't see whether the engine works first'. It just doesn't work."
And Labour leader Jeremy Corbyn, meeting fellow European socialists in Brussels, dismissed Mr Cameron's negotiations as a "theatrical sideshow ... designed to appease his opponents within the Conservative Party (and) not about delivering reforms that would make the EU work better for working people."
The Daily Telegraph reported that pro-EU campaigners were confident of securing the backing of at least 80 of the FTSE 100 firms.
Public support from dozens of the UK's biggest-name businesses would be a significant boost for Mr Cameron and the "remain" camp.