By Agencies

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David Cameron, Britain's Prime Minister, has told parliament he was right to reject proposed changes to the European treaty.

Cameron addressed MPs in London to explain why he blocked changes to the EU's Lisbon Treaty, which were aimed at addressing the euro crisis and preventing any repeat, at a Brussels summit last week. The UK was the only country out of 27 EU members to vote against the Franco-German proposal.

"Those countries are going to be negotiating a treaty that passes unprecedented powers from their nation states to Brussels," Cameron told parliament on Monday. "Some will have budgets effectively checked and re-written by the European Commission."

"None of this will happen in Britain."

He also said it was vital to Britain's national interest to remain a member of the European Union despite its decision to veto the new treaty.

"Britain remains a full member of the EU and the events of the last week do nothing to change that. Our membership of the EU is vital to our national interest. We are a trading nation and we need the single market for trade, investment and jobs," Cameron said during a debate on last week's European Union summit. 

"We are in the EU and we want to be," he said.

Monday's speech comes as Nick Clegg, the country's deputy prime minister and Cameron's coalition partner, said that Britain could be "isolated and marginalised" by the EU following the veto.

The comments by Clegg, the leader of the Liberal Democrat Party, saw him officially breaking ranks with Cameron of the Conservative Party.

"I am bitterly disappointed by the outcome of last week's summit, precisely because I think there is now a real danger that over time the United Kingdom will be isolated and marginalised within the European Union," Clegg told the BBC television network.

Clegg, who had until now limited himself to expressing "regret" over the veto, rejected Cameron's arguments that it was necessary to protect Britain's vital City of London financial services hub.

"I don't think that's good for jobs in the City or elsewhere. I don't think it's good for growth. I don't think it's good for families up and down the country," he said.

Global 'pygmy'

Clegg said he had told Cameron by telephone, after he was informed of the veto in the early hours of Friday, that it was "bad for Britain".

But he said Cameron's hand was forced by the "intransigence" of France and Germany - which both pushed for the deal to bring in strict fiscal discipline for the eurozone - and also by eurosceptic Conservative politicians.

"I think the prime minister was in a difficult position because he faced intransigence from France and Germany," Clegg said, saying it was "clear that the French government for instance would not shed a tear if Britain was pushed".

Clegg said his centrist, pro-Europe Liberal Democrats would remain in the coalition that was formed in May 2010, saying it would be "even more damaging for us as a country if the coalition government were now to fall apart".

But he urged Cameron to re-engage with Europe.

"Far from retreating further to the margin, which is what some eurosceptics want and are calling for, we should be re-engaging more fully, and we're going to have to redouble our efforts in doing so," Clegg said.

The deputy premier also warned against anti-EU elements in the centre-right Conservatives pushing for Britain to leave the bloc altogether, saying it would leave Britain as a global "pygmy".

"I think a Britain which leaves the EU will be considered to be irrelevant by Washington and will be considered a pygmy in the world, when I want us to stand tall and lead in the world," he said.