BRUSSELS • Prime Minister David Cameron admitted there was "still no deal" yesterday as he headed into a second day of talks after all- night negotiations failed to deliver an agreement to stop Britain crashing out of the European Union.
A string of European leaders have dug their heels in over Mr Cameron's demands, which include reducing welfare payments to EU migrants and opting out of a commitment to ever-closer union, forcing him into a corner.
"We've made some progress but there is still no deal," Mr Cameron said, as he entered fresh talks at the Brussels summit, five hours after the previous night's negotiations broke up.
"As I have said, I would only do a deal if we get what Britain needs, so we are going to get back in there."
Under pressure from eurosceptics in his Conservative Party and an anti-EU popular press, Mr Cameron wants sweeping reforms to the 28-member bloc, which he hopes will stop Britain from becoming the first nation to leave the EU in a membership referendum likely in June.
BRITAIN COMES FIRST
We've made some progress but there is still no deal. As I have said, I would only do a deal if we get what Britain needs, so we are going to get back in there.
MR DAVID CAMERON, on how Britain's needs are his priority.
The British Premier has hit opposition from France and Belgium over his bid to make clear Britain is not committed to ever-closer union and ensure that the City of London financial district is not bound by rules governing the euro single currency area.
Going into the talks yesterday, French President Francois Hollande again made clear his objection, saying he wanted a single rule book to "fight financial crises together".
On Day 1 of the meeting on Thursday, Mr Cameron urged his fellow EU leaders to reach a "credible" reform deal and called for a "sort of live and let live" approach to allow different visions of EU membership.
He added that the issue of Britain's place in Europe "has been allowed to fester for too long" and there was now a chance "to settle this issue for a generation".
Mr Cameron says he will back a "Yes" vote in the referendum if he can cut an acceptable deal in Brussels but aides say he is prepared to walk away if not.
Officials are refusing to rule out the possibility that Britain could become the first country to leave the EU.
In the early hours yesterday, EU president Donald Tusk warned there was much more to do to bridge these sharp differences.
"For now I can only say that we have made some progress but a lot needs to be done," he said.
Four Eastern European countries are objecting to Mr Cameron's request for a limit to welfare benefit payments for EU migrants working in Britain for four years in a bid to curb the numbers coming over.
Brussels has offered an "emergency brake" to limit benefits for new migrants for four years, which Britain could invoke if its welfare system is overwhelmed by the inflow of workers, as it believes it has been.
But Poland and other Eastern European member states, which have hundreds of thousands of citizens in Britain, bitterly oppose such a change, saying it would discriminate against them and undermine the EU's core principle of freedom of movement.
On the plus side, Mr Cameron has won the crucial support of German Chancellor Angela Merkel, who said: "Advantages are higher than disadvantages when there is Brexit."
Dutch Prime Minister Mark Rutte, another Cameron ally, warned that talks could drag on today .
"We cannot exclude that this will spill over into the weekend," he said.
British opinion polls early yesterday suggest a narrow lead for those who want to stay in the EU but there does seem to have been a modest increase in the "No" camp. Many voters are thought to be undecided.