LONDON (Reuters) - Prime Minister David Cameron faces a split in the Conservative party over his reluctance to hold a referendum on proposals to fix the euro zone crisis.
The leaders of France and Germany agreed a masterplan on Monday for imposing budget discipline across the 17-nation euro zone, which Britain remains outside, saying the European Union's basic treaty will need to be changed.
Many Conservative MPs regard the crisis as an opportunity for Cameron to demand British opt-outs from EU rules on issues such as labour law, financial services and agricultural policies.
A number want to go further and use legislation passed by Cameron's coalition government since it came to power last year to hold a referendum on proposals for greater fiscal union among euro zone members.
"Fiscal union, whether it is a fiscal union by the 27 (EU members) or by the 17, will amount to a very big change in our relationship with our EU partners, and that should trigger a referendum," Conservative MP Bernard Jenkin said.
Jenkin was one of 81 Conservative politicians, a quarter of Cameron's MPs, who demonstrated their disruptive potential in October when they rebelled in a defeated motion for a referendum on EU membership.
Douglas Carswell, another Conservative rebel, said a referendum was the only way to prevent British officials agreeing to a deal that would put UK interests at risk.
"If you fuse together a euro core bloc of 17, political gravity will be such that power will shift," he said.
"The only way to make sure we get what we need as a country is to make sure that the dealmakers, the ministers and the mandarins, have to put the new deal to the people."
Cameron is resisting calling a referendum, which would expose rifts in a Conservative party increasingly suspicious of Europe and could rupture his governing alliance with the smaller, pro-Europe Liberal Democrats.
In an attempt to mollify his eurosceptic critics, Cameron said he would demand safeguards for British interests, such as ensuring the EU's market is not distorted by closer cooperation between euro zone countries, at a European summit this week.
"I won't sign a treaty that does not have those safeguards in it, around things like, of course, the importance of the single market and financial services," he told BBC television.
"Euro zone countries do need to come together, do need to do more things together ... if they choose to use the European treaty to do that, Britain will be insisting on some safeguards too. And as long as we get those, then that treaty can go ahead. If we can't get those, it won't."
Cameron's officials say Britain's primary interest is ensuring the euro zone deals with the debt crisis, and that now is not the time to demand large concessions from Europe.
Under Britain's' European Union Act, the coalition government is required to hold a referendum on any EU changes that result in a big switch of power from London to Brussels.
The government says European leaders seeking to fix the euro crisis are not proposing a transfer of power from Britain to the EU and so the issue of a referendum does not arise.
Jenkin said the government was trying to hide behind the detail of the legislation.
"If the government sticks to the EU Act they are sticking to a very tightly drawn legal definition of what constitutes a change (of treaty), that bears no relation to real politics and real power," he said.
Cameron has little room to manoeuvre and can only hope that his demand for safeguards will prompt European leaders at their summit to offer him at least the promise of some concessions that could be negotiated at a later date.
His officials say a crisis-solving agreement that just involved the 17 euro zone countries would not have to be debated in Westminster, offering Cameron a further respite.
"The astute politics here is to try and avoid a scenario where it even comes to a vote in the (House of) Commons because that could just be very uncomfortable," said Andrew Russell, politics professor at Manchester University.
Editing by Robert Woodward