DAVID Cameron dramatically raised the stakes over the EU budget yesterday, threatening to do a deal with like-minded countries to push through cuts.
The Prime Minister said an agreement between all 27 EU counties on a new seven-year framework was "doable". But he warned he would not sign up to any agreement which involved unaffordable spending.
Instead, he threatened to build alliances with other countries to agree yearly spending limits.
The barely veiled threat comes just days after EU leaders left Brussels following the collapse of 40 hours of tense negotiations.
At the time, Mr Cameron said EU institutions lived in a "parallel universe" and had to get with the "real world".
Yesterday, he told MPs that last week had seen leaders make progress towards cutting the proposed budget. But he said the deal on the table was not enough, and would have cost the UK more than £1 billion a year.
He laid the blame with the EU president Herman Van Rompuy who he said had failed to significantly cut the proposed budget overall and simply redistributed limits "to buy off other countries".
Mr Cameron insisted that there was no reason why the spending ceilings could not be reduced further.
He said: "But that deal can not come at any cost. We must not lock in unaffordable ceilings for the next seven years.
"So if necessary, we may have to galvanise a coalition of like-minded countries to deliver budgetary restraint through annual budget negotiations each year."
Labour accused the PM of being isolated in Europe and continued to press him on what he meant by a "real terms freeze".
During negotiations last week Downing Street refused to be drawn on the number they were pushing for, describing such a move as a "really dumb" way to negotiate.
The talks collapsed on Friday afternoon after two days of discussions.
l A majority of people want Britain to leave the EU provided it could keep its close trade relationship with EU countries.
According to a ComRes survey for The Independent, 54% agree that Britain should leave the EU but maintain close trading links, while 36% disagree.
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