David Cameron has dramatically vetoed a European Union Treaty change, risking political isolation and forcing the most far-reaching EU shake-up in decades.

At least 23 of the 27 member states are now going ahead with their own treaty to bring in tougher economic sanctions and restore single market credibility and stability.

Only the UK and Hungary were certain to stay out of the new grouping, with Sweden and the Czech Republic consulting their parliaments before deciding.

But Mr Cameron was unapologetic at a dawn press conference in Brussels after 10 hours of talks at a summit in Brussels. He said he wished the eurozone well with its new treaty, but the UK could not accept it as the safeguards he had demanded were not on offer.

The Prime Minister declared: "I had to pursue very doggedly what was in Britain's interests, which is very difficult in a room where people are pressing you to sign up to things because they say it is in all our interests."

What was in Britain's interests, said Mr Cameron, was to win guarantees that in return for backing a 27-nation treaty change to bring in a new "fiscal compact", the UK's voice in crucial policy issues on the single market and the financial services sector - vital for the City of London - would not be diminished.

Without such guarantees he did not back the treaty, prompting Germany and France to lead the move to set up a separate treaty to achieve their aims.

He insisted the decision to create a new, separate treaty instead of being able to forge a "treaty within a treaty" did not leave Britain isolated.

French president Nicolas Sarkozy staged his own press conference to declare that Mr Cameron had made "unacceptable" demands for exemptions from certain financial regulations in return for joining in the "fiscal compact" enshrined in the treaty change.

And European Commission president Jose Manuel Barroso said he regretted that unanimity on treaty change had not been possible: "Having seen it was not possible to get unanimity, it was the proper decision to go ahead at least with those ready to commit immediately. That includes all 17 in the eurozone, plus some who are not in the euro area but want to take part in this fiscal compact."