Pressure mounts on Cameron as rebels demand a referendum

The Prime Minister's threat to veto a deal on ending the problems in the euro has angered some in Brussels (EPA)

David Cameron is under mounting pressure from all sides as he prepares for today's critical European Union summit aimed at ending the crisis in the eurozone.

A second cabinet minister joined Conservative backbenchers in demanding a referendum on Europe – which Mr Cameron cannot agree to without risking the break-up of the Coalition because the Liberal Democrats oppose one.

Owen Paterson, the Northern Ireland Secretary, openly challenged Mr Cameron's opposition to a UK referendum on the proposed new EU treaty to impose budgetary discipline in the 17 eurozone countries.

"I think there will have to be one, because I think the pressure would build up," he told The Spectator magazine. "This isn't going to happen immediately, because these negotiations are going to take some months. But I think down the road that is inevitable."

Mr Paterson's intervention is significant because Iain Duncan Smith, the Work and Pensions Secretary, was slapped down by Downing Street on Monday after calling for a referendum. Several other ministers have privately lobbied Mr Cameron to take a tough line at the summit. Backbenchers threatened a protest motion signed by more than 100 Tories if he returned empty-handed from Brussels.

After Mr Cameron endured several demands for a return of some EU powers to Britain at a difficult session of Prime Minister's Questions, Boris Johnson joined the Tory rebellion. The Mayor of London told BBC Radio 4: "If there is a new EU treaty that creates a fiscal union within the eurozone, then we would have no choice either to veto it or to put it to a referendum."

Mr Cameron's juggling act was made more difficult when Angela Merkel, the German Chancellor, and Nicolas Sarkozy, the French President, outlined their blueprint ahead of the two-day summit, which begins tonight.

Their joint letter to other EU leaders revived their call for a transaction or "Robin Hood" tax, which Britain strongly opposes because of its impact on the City of London. But Mr Cameron can veto an EU-wide tax – and could call the eurozone's bluff by inviting it to go ahead without the UK, which could give London an advantage over the rival financial centres in Frankfurt and Paris.

Mr Cameron tried to reassure Tory MPs, telling the Commons: "The more that countries in the eurozone ask for, the more we will ask for in return."