Cameron: eurozone integration means 'new EU settlement' for UK

Welcoming steps to agree the legal framework for the European Central Bank (ECB) to assume its role as a single supervisor of the eurozone banking sector, he said "the single currency needs a banking union and we won't stand in the way even though we won't be involved."

He added that the new supervisory framework, along with a common resolution mechanism to wind-up failing banks and a harmonised deposit guarantee scheme would be a "massive change" for the EU.

"As the eurozone integrates further there are new opportunities for a new settlement for Britain," he said, noting that these changes would then be decided in a referendum.

However, he insisted that he would not back the UK's withdrawal from the EU.

"Leaving the EU is not in our national interests, we are a trading nation and around 50 percent of our trade is with the EU," he said.

Under the banking union proposals agreed last night, the ECB will begin work as the single supervisor of the eurozone's banking sector in 2013, with the legal framework to be in place by the end of 2012.

Cameron's Conservative-led coalition has in the past urged the eurozone to act fast to tackle the sovereign debate crisis, also calling for a eurozone budget and a move to adopting joint liability eurobonds.

His comments are the latest sign that the UK sees eurozone integration as a chance to loosen its relationship with the EU

Last week, home secretary Theresa May confirmed that the UK would use its right under the Lisbon Treaty to opt out of over 130 legal acts on justice and home affairs policy.

The opt-out includes co-operation on cross-border crime as well as the controversial European Arrest Warrant, which allows criminal suspects to be easily extradited to face charges across the EU.

The move has caused consternation in Brussels.

Manfred Weber, a German centre-right MEP on the justice and home affairs committee, accused the UK of "destroying" measures to increase co-operation between member states on cross-border crime and policing.

European Parliament President, Martin Schultz, indicated earlier this week that he would look at whether MEPs should be allowed to vote on legislation that their country will not apply.

Meanwhile, Finnish Europe minister, Alex Stubb, told summit reporters on Thursday (18 October) that the UK was "saying bye-bye to Europe."

Cameron has come under concerted pressure from factions of his Tory party to call an 'in/out' referendum on Britain's membership of the EU.

Surveys by the ConservativeHome website have indicated that a majority of party members would vote for EU withdrawal.