German Chancellor Angela Merkel will today tell David Cameron in Berlin that the EU treaty changes needed to set up the body should not trigger a referendum in the UK despite pressure from Tory MPs. The memo is also understood to set out that larger eurozone economies which are considered too big to bail out should be allowed to default on their debts, effectively going bankrupt. The document is bound to fuel fears that a powerful economic bloc is emerging in Europe that will effectively be under German control.

Mr Cameron, who will also meet EU President Herman van Rompuy and European Commission President Jose Barroso in Brussels today, was expected to press Mrs Merkel to make the European Central Bank take responsibility for shoring up the euro. Instead, he will be confronted by the ambitious German plan. The fact that Germany appear to have already decided that the British people will be excluded from any say on EU treaty changes will infuriate many Tories.

But Mrs Merkel claimed yesterday that Mr Cameron will come around to her view. She said: "We've seen a sovereign debt crisis evolve in some states and particularly those in the eurozone find themselves in the international focus. It was right of David Cameron to concern himself with the UK's debt issues when he became Prime Minister. That's my firm conviction, and once the negative focus has moved away from Europe, he will examine a stronger involvement with other countries."

The six-page memo sets out plans for the establishment of a new European Monetary Fund that can intervene in the economies of debt-hit eurozone countries. In Effect It says: "Limiting the effect of treaty changes to the euro-zone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referendums could be necessary, which could also affect the UK)." It will be seen as a massive surrender of sovereignty by the nations involved.

He said: "We've got an Opposition Day on Tuesday, so it was the ideal time to call for the referendum and draw up the motion. The UK Still Suffers Terribly From The Way Things Have Evolved Within The European Union And It Is High Time We Grabbed Back Control And Regained Power Over Our Destiny." The debate will be seized on by eurosceptics desperate to keep momentum going following Mr Cameron's decision to walk away in the face of French implacability, and refusing to sign up to a treaty change demanded by a Franco-German alliance that would impose fiscal union on profligate eurozone states.

The Prime Minister's move leaves Britain standing alone against all the 26 other European member states which have indicated they will agree to the "Merkozy" deal. Mr Cameron decided to use his veto after French President Nicolas Sarkozy refused to meet our modest demands to safeguard Britain's interests. Chancellor George Osborne yesterday praised the Prime Minister for battling to protect the UK financial sector, which accounts for 11 per cent of our gross domestic product and employs hundreds of thousands of people, from a flood of new European regulations.

He maintained: "If we had signed this treaty, if David Cameron had broken his word to parliament and the public - gone there and caved in without getting the safeguards he was looking for - then we would have found the full force of the European treaties, the European Court, the European Commission - all these institutions enforcing those treaties - using that opportunity to undermine Britain's interests, undermine the single market."

"We were not prepared to let that happen."

Others are even calling for Britain to be driven out of Europe altogether. German Euro MP Martin Schulz who is due to become President of the European Parliament next year, said: "I doubt in the long term whether Britain will stay in the EU. The EU can, if necessary, do without Britain, but Britain would have more difficulty without the EU."

Gunther Krichbaum, the chairman of the powerful EU committee in the German parliament and a political ally of Chancellor Angela Merkel, said: "The Treaty of Lisbon explicitly opens the possibility of a country's withdrawal. The British must now decide whether they are for or against Europe." Elmar Brok, a senior German Christian Democrat Euro MP, said the EU "must now marginalise Britain, so that the country comes to feel its loss of influence".

The new "fiscal union" bloc within the EU - made up of the 17 euro nations and their allies - is due to hold monthly summits from next year. While Britain will be excluded from the gatherings, Whitehall officials are braced for a string of new initiatives that will have an impact on the UK economy. One Whitehall source said: "A decision taken by the Euro-Plus summit is a fait accompli for the EU. If what the Euro-Plus decides will be translated into an EU decision via its in-built qualified majority, Britain won't have a chance to influence EU decisions on economic, social and employment legislation that overrides its national law."

Some EU officials believe that Britain's financial services sector is still under threat from more tax and regulation despite Mr Cameron's veto of EU treaty changes. One diplomat said: "Cameron sank the treaty talks with a demand for protections for the City of London. The resulting grouping will be a battering ram to force through EU decisions, taken by qualified majority voting." Daniel Cohn-Bendit, leader of the Green Euro MPs in the European Parliament, said: "Now we must put pressure on the British and force them, by implementing tough regulations on financial markets, to decide if they want out of the EU or stay inside."

Now forecasters are warning that storms will hit the south-east over the next few days, with wind speeds reaching 100 mph. The Met Office has issued yellow warnings for strong winds and heavy rain on Monday night for most of England, with the south-east expected to be hit hard. Windy weather is expected to continue into Tuesday, with the potential for "severe gales" or storm-force winds across Northern Ireland and the southern half of Britain. There could also be frequent, heavy showers, bringing the risk of flooding.

Aisling Creevey, a forecaster with MeteoGroup, the weather forecasting arm of the Press Association, said it was too early to tell where the winds would hit. She said the country could expect winds of between 80 mph and 100 mph. "It is very difficult to know at this stage where exactly the storms are going to be," she said. "There's a system coming through on Tuesday and again on Thursday We could see gusts of 100 mph in some places but there is very little confidence about exactly where." A Met Office spokesman said: "Strong winds on Monday evening have the potential to cause some disruption, especially in areas exposed, to the south."

"In addition, rain will turn persistent and heavy, bringing the risk of surface water flooding over south-west England and Wales. At this stage there is some uncertainty and the public are advised to monitor forecasts to keep up to date with this warning."

Mr Clegg used the BBC's Andrew Marr programme yesterday to engage in a very public therapy session after what had obviously been a traumatic couple of days for him. Expressing his pain, the Lib Dem leader said the veto - which he had been described as endorsing on Friday - was 'bad for Britain' because, in the words of the familiar euro-federalist cliche, it left our country 'isolated and marginalised'. So much for the constitutional doctrine of collective Cabinet responsibility that is supposed to bind the Government together publicly on all points of policy.

However, it is hardly surprising that Mr Clegg has reached breaking point. He is a fully-subscribed euro-obsessive, unable to see any wrong in the misjudgments, corruptions and idiocies of the EU. Indeed, he shows a Moonie-like faith in the institution. He sees everything through a Euro-prism. It distorts his own world view and hopelessly undermines his judgment. Even today, he cannot bring himself to condemn the basket case of a currency that is the euro, and the absurd one-size-fits-all basis upon which it was constituted.

While it is, also, crystal clear to most rational people that the 'plan' to which Mr Cameron would not sign up in Brussels will not work, Mr Clegg appears to trust it implicitly. Being a former MEP and one-time bag-carrier to Lord [Leon] Brittan, the former European Commissioner, he has a blind faith in the single currency and the whole project of 'ever closer' union. Mr Clegg's Europeanism may partly derive from having a Dutch mother and a Spanish wife. Also, on his father's side he has Russian, German and Ukrainian roots and he commendably speaks five languages.

All this seems to have put the deputy prime minister at a distance from a the very idea of Britishness, and from the hopes, beliefs and aspirations of most of the British people. Also, Mr Clegg should be warned that the only thing that will make the Tory Euro-sceptics even more gleeful than they are today following Mr Cameron's use of Britain's EU veto would be if the Lib Dems broke the Coalition. Such a move would precipitate a January election that the Tories would win, to judge from the massive support expressed already in opinion polls for Mr Cameron's stand.

Meanwhile, France accused Syria of being behind attacks that wounded French soldiers in the United Nations Interim Forces in Lebanon (UNIFIL) on Friday. Most of Damascus was shut down, but Assad's soldiers forced some shopkeepers to open their stores, and in some cases simply kicked in the doors and opened the stores themselves. Indicative of Assad's weakness and paranoia was a report from the Egyptian newspaper Al Ahram Sunday that his aides are afraid of an assassination attempt on the president-dictator.

SANA, the official government news agency, is acting as if nothing unusual is going on in the country except for "terrorists" who have killed several soldiers. Hundreds of troops have defected, and there were heavy casualties on both sides in Sunday's battles that brought the country closer to a civil war. The death toll since the beginning of the uprising is impossible to verify because of the government ban on foreign journalists and its jamming of Internet connections, but the number 4,000 appears to be an understatement.

In addition, thousands have been wounded.

It comes as a leading economist has forecast the UK will fall back into "outright recession" next year. Gerard Lyons, Standard Chartered's chief economist, has predicted the UK will contract by 1.3 per cent in 2012, far more than the official forecast of a 0.1 per cent fall in the final three months of the current year. Mr Lyons said the fall will be caused by "a squeeze on incomes, the tightening of fiscal policy, low confidence and the hit to exports from a recession in Europe. It will be both a tough domestic and external environment".

He suggested the Chancellor will have to borrow more to stimulate growth. "While the low yields the UK now pays help keep debt payments down, this should not be their only benefit," he said. Calls for a fiscal stimulus could be reinforced by the BIS study, which suggested the Bank is running out of ammunition to rekindle the recovery, having just increased its money printing programme from 200 billion pounds to 275 billion pounds. In its quarterly report, BIS cited reasons why QE would have a limited effect. "In terms of programme size relative to the amount of outstanding debt, the purchases might be subject to diminishing returns," it said.

The analysis shows that QE accounts for about 30 per cent of the free float in the UK, excluding QE2, compared with about 20 per cent in the US. Analysts have questioned whether the Bank is running out of policy measures.

It is happening just as Europe's banks slash their books to meet the EU's core Tier I capital ratios of 9 per cent. The Basel-based Financial Stability Board - the collective voice of the world's monetary authorities - fears the banks could inflict a 2.4 trillion euros crunch over "coming months", just as Euroland crashes back into recession. It is hard to imagine a more reckless recipe for social disorder than to combine these shocks at once.

Europe's mishandling of its affairs is now grave enough to alarm the Pentagon, presumably well-briefed by the DIA, NSA, and ECHELON network of electronic eaves-dropping. "We are extraordinarily concerned by the health and viability of the euro because in some ways we're exposed literally to contracts but also because of the potential of civil unrest and break-up of the union,'' said General Martin Dempsey, chair of the US Joint Chiefs of Staff. Many of those EU leaders who went along with this summit accord - including France's Nicolas Sarkozy - must know that it is Medieval leech-cure treatment and can only drain the lifeblood from large parts of wasted Euroland.

The tension would not exist if Germany and its satellites had their own hard currency, reflecting their hard economy and the tastes of their own hard-working peoples. A free float would restore equilibrium by natural means, consistent with Kultur. At the end of the day, it always comes down the one core problem, the euro itself. Monetary union itself blocks any plausible solution. We have not advanced one inch.

Everything was over after half an hour. At that point the summit, which was expected to be a historic one, had not even begun, and yet it was already clear that it would not end well. German Chancellor Angela Merkel and French President Nicolas Sarkozy had met with British Prime Minister David Cameron at 7:30 pm on Thursday evening. Their goal was to determine how far Great Britain would be willing to go to support the German-French plans to save the euro. Not very far, it would soon become clear.

Cameron demanded extensive exceptions for his country in the event that the European treaties would have to be amended. Most of all, however, he wanted the British financial sector not to be subject to European supervision. Merkel and Sarkozy quickly made it clear to Cameron that that would be unacceptable. And so the summit, which was intended to be a turning point in the struggle to save the euro, ended up marking a major turning point in the history of the European Union. In the middle of its biggest crisis to date, the European Union is divided and Great Britain has been sidelined, possibly for the long term.

The remaining countries want to follow the 17 members of the euro zone on the path to the sort of fiscal compact Merkel and Sarkozy have outlined. They want it to become a so-called "stability union," with balanced budget provisions to be written into national constitutions and automatic sanctions for deficit offenders. It's the kind of union that Merkel believes is inevitable.

But many countries are only following the Germans' lead with reluctance. The agreement only came about because investors are shunning the bonds of ailing euro-zone countries, and because even the strong countries are facing the possibility of having their creditworthiness downgraded by the rating agencies. But other countries that have long supported a true economic government are asking themselves why the Germans had hesitated for so long.

Great Britain is now largely isolated. As a result, it needs to ask itself what role, if any, it still plays in this new Europe.

Merkel, for her part, wants to prevent Britain and the euro zone from drifting further and further apart. She recently told confidants that it is important to give the British the feeling that they are still part of Europe. But the French see it differently, hoping that they will carry more weight in a union that does not include Britain.

European Union (EU) leaders ended the summit with a historic agreement to draft a new treaty for deeper integration in the euro zone, but analysts and policymakers remained skeptical such long-term steps could solve the crisis that has shaken Europe for two years. While German Chancellor Angela Merkel said she didn't expect leaders would meet again before Christmas, a senior EU official said he thought market pressure would compel them to meet in a room together again sooner rather than later.

The euro slipped early on Monday, safe haven German government bond futures rose and European stock futures were pointing lower, though none of the moves were dramatic. "The moves by the euro zone policymakers are not a damp squib but neither are they the big bazooka hoped for that could really ease market tension for an extended period," said Howard Archer, economist at IHS Global Insight. The euro slipped in Asia on Monday as investors took the view that the EU plan was not the decisive move needed to resolve the debt crisis.

Those steps, together with a leveraged EFSF - the existing bailout fund - are intended to boost help for troubled euro zone countries, such as Italy and Spain, the bloc's third and fourth largest economies, as they muddle through their refinancing crunches. Italy alone has 150 billion euros in debt falling due between February and April of next year.

More than two-thirds of this is devoted to protecting children - via social care and child support - and tackling the crime and anti-social behaviour such families often generate. Police have said that in some cases it would be cheaper to have an officer permanently stationed at a family's home than respond to constant call-outs. The findings come ahead of a major speech later this week by David Cameron in which he is expected to announce new sanctions against such families - combined with what sources describe as 'targeted resources' - as part of his mission to tackle 'broken Britain'.

Researchers devised a seven-point checklist of factors, with families that fulfilled five or more being designated as 'problem'. The criteria include no one in the family being employed, neither parent having any qualifications and being unable to afford certain basic food or clothing items. The research reveals that teenagers raised in such families are 36 times more likely to be excluded from school than children in families with no problems. They are also six times more likely to have been in care, while 63 per cent of boys whose fathers are jailed will eventually be convicted themselves.

Downing Street's determination to deal with problem families has been strengthened by the need to make deep cuts to local authority budgets. One Whitehall source said: 'We simply don't have the money to spare. These families are a drain on local services, which could be much better directed elsewhere. One local police force told us that it would actually be cheaper to have an officer permanently stationed on the family's sofa than have to respond to the constant call-outs to the house.'

'We need to get kids back in the classroom, and to get parents off drugs and on to a work programme to stop them committing crime.' Communities Secretary Eric Pickles said: 'For too long, these families have been locked in a cycle of state dependency. Worklessness has been passed down from generation to generation. Over the years, millions of pounds have been squandered on fruitless, unco-ordinated investment and we can no longer afford to foot the bill.'

David Cameron has received overwhelming support from British voters over his historic decision to veto changes to the EU Treaty. If there was a referendum today on whether the UK should quit the EU, it would be likely to produce a resounding Yes. Nearly 50 per cent say we should go our own way, with 33 per cent in favour of staying in.

Amid the frenetic recriminations following the summit, the poll shows Mr Cameron's dramatic move to set Britain on a separate course from the other 26 nations in the EU is wholeheartedly endorsed by voters. The summit triumph has also wiped out Labour's lead in the opinion polls. Both Labour and the Conservatives are now on 35 per cent, with the Lib Dems on 14. According to the exclusive poll for The Mail on Sunday, nearly two-thirds of voters believe the new EU initiative, designed to save the euro by imposing tough economic controls on bankrupt European countries, is probably a waste of time.

Two in three want a referendum on Britain's future in Europe with just 22 per cent against. Calls for Mr Cameron to press home his advantage and demand that Brussels hands back more powers to London produce an almost identical level of support. The public are in no doubt that despite all the grandstanding by French President Nicolas Sarkozy, Mr Cameron came off best in Brussels. When asked if the Prime Minister had done well from the negotiations, more than half agreed. In comparison, German Chancellor Angela Merkel scored 44 per cent with Mr Sarkozy languishing in third place on 35.

Interestingly, as Britain steps back from Europe, there is growing nervousness at the advance of German influence in the new-look EU. Seven out of ten say the summit has given too much power to Germany - with a mere 13 per cent disagreeing. Nor is the jittery feeling restricted to Britain. Warning of a backlash, an article in leading German newspaper Der Spiegel said: 'We are going to have to put up with a bit of Germanophobia.' Charles Grant, director of the London based Centre for European Reform think tank, said: 'For the first time in the history of the EU, the Germans are now in charge.'

The City provides services to a large part of the world, and financial services are our biggest sector for employment, taxes and exports. The EU, and Germany and France in particular, envy that position. They would like to divert as much of that activity as they could to Frankfurt and Paris, hence the proposed regulations to move the markets in so-called Over the Counter Products such as foreign exchange, and bonds onto exchanges, like Deutsche Borse and Euronext.

THE EUROZONE LEADERS ALSO FEAR THE MARKETS BECAUSE THEY ARE THE LAST THING WHICH HOLDS THEM TO ACCOUNT.

Because the eurozone countries are running such large budget deficits they are answerable to the bond markets which are now refusing to supply those funds. The attempts by the EU authorities to silence the markets by devices such as bans on short selling are a clear sign of their wish to shoot the messenger, but they are ineffective whilst those market are in and regulated from London.

We are told by critics like Labour's Douglas Alexander that this move has left Britain isolated from Europe. This might be worrying if it were not for the fact so far the Euro has proven to be an unmitigated disaster and there is nothing from this latest in the seemingly endless series of summits to suggest that this will change. We are told that the whole point of the treaty changes was to ensure that there was some central authority which would ensure that, in future, eurozone countries cannot run up the sort of debts which they now have.

DIDN'T WE ALREADY HAVE SUCH RULES IN THE IRONICALLY NAMED GROWTH AND STABILITY PACT ENSHRINED IN THE MAASTRICHT TREATY WHICH WERE DISREGARDED?

"We can't see it's really changed anything," is spokesman Graham Sharpe's verdict on a conflab that produced a more isolationist Britain and a potential two-tier EU - but failed to convince anyone, least of all the markets, that monetary union at last had some durable political oomph behind it.

Simon Smith, chief economist at FxPro, says the fate of the eurozone has now become "binary": "Either one or more of the countries will leave or you'll see an accelerated path to fiscal union. But what has been agreed at this summit doesn't go far enough towards fiscal union. The momentum on that is too slow. I'm less optimistic than I was a couple of months ago."

German chancellor Angela Merkel insisted the agreement was not a "lousy compromise". But, like many economists, Smith suspects it is exactly that. It is built around a toothless-looking "fiscal compact" that is not only reminiscent of the discredited Stability and Growth Pact but does nothing to address what many see as the real eurozone problem - the current account imbalances that are reinforced by, say, Greece's lack of competitiveness compared to Germany's. Instead, Merkel remains focused on deficits.

Indeed, the agreement ducks all of the big fiscal decisions, such as debt pooling or some sort of centralised EU Treasury. Neither is there a banking licence for the so-called "permanent" rescue fund - the European Stability Mechanism (ESM) - that is planned to displace the European Financial Stability Facility (EFSF). The ESM will now be set up by July next year, instead of 2013, with a potential cap of 500 billion euros to appease Merkel. But, as Hardy notes, there's "no word on where those funds would come from".

Richard McGuire, senior fixed income strategist at Rabobank comments: "Crunch time" could be the first half of next year, with Italy having to refinance 36 billion euros of debts in February, 27 billion euros in March and 28 billion euros in April. That is part of a programme that will see almost 400 billion euros of debt issuance by Italy next year - not to mention around 150 billion euros by Spain. Yields on Italian 10-year debt currently stand at 6.8 per cent. On Spain's, the figure is 5.8 per cent. If either stick above the bail-out alert level of 7 per cent, eurozone leaders will have to come up with something better than last week's flim-flam.

That day has not yet arrived, however. As Trevor Greetham, Fidelity's director of asset allocation, says: "There are probably only two stable equilibria, full political union or break-up. With neither imminent, I'd say volatility is here to stay."

It is an irony of history - on this very day 20 years ago, the Maastricht Treaty was signed, bringing the European Union into existence. On December 9 and 10, 1991, the 12 leaders of the European Community agreed to the groundbreaking agreement and a historic project was set on its way.

Two decades on, and with the European debt crisis in full flow, the EU is facing its toughest test so far. Now one person stands out as the most divisive figure: David Cameron. Following marathon talks on Thursday night, the British prime minister vetoed a change in the EU treaties as called for by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Cameron's use of his veto has provided for much discontent within the European Parliament. "IT WAS A MISTAKE TO ADMIT THE BRITISH INTO THE EUROPEAN UNION," said Alexander Graf Lambsdorff, a prominent German MEP with the business-friendly Free Democrats, and vice chair of ALDE, the liberal block in the European Parliament. The UK must now renegotiate its relationship with the EU, he said. "Either they do it by themselves, OR THE EU WILL BE FOUNDED ANEW - WITHOUT GREAT BRITAIN," Lambsdorff said. "Switzerland is also a possible role model for the British," he added, refering to the fiercely independent stance of the Alpine country, which is not an EU member.