After a marathon meeting that started at dinner time on Thursday evening and finished at 6am on Friday, eurozone member states agreed to create an intergovernmental treaty to forge stricter budgetary controls for the group's member states. Britain has opted to remain out of the treaty.
"I said before coming to Brussels, that if I could not get adequate safeguards for Britain in a new European treaty, then I would not agree to it," David Cameron said.
"What is on offer is not in Britain's interest, so I didn't agree to it. Let me explain why this matters, of course we want the eurozone countries to come together and to solve their problems, but we should only allow that to open inside the European Union treaties, if there are proper protections for the single market and for other British key interests. Without those safeguards it is better not to have a treaty, but to have those countries make their arrangements separately. That is now what is going to happen."
French President Nicolas Sarkoy said fellow European Union leaders had adopted a Franco-German proposal for a treaty to reform the way governments control their finance, and criticised Britain for wanting to stay out.
He said that the new treaty would be adopted by the 17 eurozone members and open to those non-members that wanted to adopt it too.
"David Cameron asked for something that we all thought was unacceptable: a protocol in the treaty that would allow the United Kingdom to be exempt from a certain number of regulations on financial services. We weren't able to accept that because we consider on the contrary that a good part of the worries of the world comes from the deregulation of financial services," he said.
German Chancellor Angela Merkel also welcomed the new treaty proposal.
"I believe that after long negotiations this is a very, very important result because we have learned from the past and from mistakes and because in future there will be binding decisions, binding rules, more influence from the commission, more community and with that higher coherence," she told reporters.
The Guardian's Larry Elliott pinpointed the problem with Cameron's ridiculous stance, stating he took the wrong message to the European summit:
David Cameron has his red lines for the crunch two-day European summit starting on Thursday. They are predictable red lines. They are the red lines that any prime minister in the last three decades would have drawn. And they are the wrong red lines.
The prime minister will go to Brussels determined that the City of London be safeguarded from any of the dangerous ideas circulating on the other side of the Channel, such as a financial transactions tax. If he is serious about rebalancing the UK economy, he might be better off agreeing to some of these "dangerous" proposals, letting the City fend for itself (something it is perfectly capable of doing) and devoting some tender loving care to Britain's manufacturers.
This is something policymakers say they want to do but never actually get around to. Winston Churchill talked of his desire to see finance less proud and industry more content. Harold Wilson waxed lyrical about how the UK of the future would be forged in the "white heat" of technology. Only this year, George Osborne said in the budget that his plan for rebalanced growth involved "a Britain carried aloft by the march of the makers". The song remains the same: rhetorical flourishes to disguise the fact that for the past century Britain has gone steadily backwards as an industrial power.
This is a country that has never had a problem manufacturing fine-sounding phrases; making things, on the other hand, has been a rather different matter. The reality is that for many years the only industry that has really mattered in Britain has been the financial services industry. Picking winners has been abolished for all but one special interest group in the economy: the City.
Cameron is not the only occupant of Downing Street to single out the Square Mile for preferential treatment. Tony Blair gave the City its own special test when Britain was contemplating joining the single currency, while in his last speech to the UK's financial bigwigs as chancellor in June 2007 Gordon Brown said Britain needed "more of the vigour, ingenuity and aspiration that you already demonstrate that is the hallmark of your success".
Six weeks later, "vigour, ingenuity and aspiration" were revealed to be stupidity, recklessness and greed and the global economy was sent plunging into recession from which the UK economy, and its already feeble manufacturing sector, have yet to recover.
There has been no march of the makers. On Wednesday data showed that the output of British factories was down by 0.7% in October, an even worse performance than the expert analysts had been predicting. Far from being in the vanguard of economic revival, Britain's factories are leading the retreat. There are one or two bright spots: production of capital goods is on a gentle upward trend, which suggests that some hi-tech firms are prospering; output from food and drink companies is up, because even when the overall economy is struggling people still have to eat.
The government's explanation for the decline in industrial output since the spring – the crisis in the eurozone – is not wholly convincing. Germany's manufacturing output rose strongly in October and has recovered all the ground lost during the deep recession of 2008-09. Britain's factory production is still 7% below where it was at its peak in 2007, despite the benefit of a 25% drop in the value of sterling, which makes exports more competitive on world markets and increases the cost of goods and services imported into the UK.
What's more, the recent weak performance is part of a longer trend. Traditionally, manufacturing has prospered in times of economic growth, but the five-year period of robust expansion leading up to the financial crisis of 2007 saw factory output flatline. There has been no growth at all in production since the late 1980s. British industry has been hollowed out.
The strong supply chains that support the big names of German, Japanese and French manufacturing are absent in Britain, which has a small number of world-beating companies such as Rolls-Royce and a large number of what amount to little more than industrial workshops employing a dozen people or fewer. There is nothing remotely like Germany's Mittelstand.
The UK's trade deficit in goods continues to widen, as it has done inexorably since the early 1980s, only this time without the cushioning effect of North Sea oil and gas production. Wednesday's data from the Office for National Statistics shows that the fields are rapidly running dry: North Sea output is down by 30% since 2008.
The travails of manufacturing and the decline in oil and gas output have made the UK even more dependent on financial services as it tries to pay its way in the world. Britain's surplus in its trade in services – of which financial services makes up a big component – offsets more than half the deficit in trade in goods.
This is the argument used by the City when it lobbies ministers for help in blocking things it doesn't want – a financial transactions tax, a splitting up of banks into retail and investment arms, more European regulations. The message is simple: there is only one goose capable of laying any golden eggs, so do you really want to kill it?
We have been here before. Churchill listened to the City and put Britain back on the gold standard, with baleful consequences for industry. Likewise Cameron and Osborne can see the dangers in having all the nation's economic eggs in one basket, but as manufacturing continues to head south they expend large amounts of political energy ensuring there is no diminution in a financial services sector they say they want to see become relatively less important. It is like watching the clock being turned back to the heady days before the crisis. Nothing has changed.
There you have it, David Cameron is basically pandering to the banksters and his isolationist policies risk throwing Britain back into the Dark Ages. Cameron and Osborne are flirting with disaster, basically betting on a a growth path that relies increasingly on the complete financialization of the British economy. Unfortunately, too many other developed economies are heading down this dangerous path.
Below, watch David Cameron and Nicolas Sarkozy discuss their diametrically opposed views. Then watch the controversial snub from Sarkozy toward his British counterpart at the EU summit. If true, bet you Sarkozy was thinking something really nasty like "Va te faire foutre imbécile! Stop pandering to the banksters at the City!"