It is the beginning of the end for Britain's membership

Britain was left on the margins of the European Union last night after the biggest split in its 54-year history. "It is the beginning of the end for Britain's membership," one EU source predicted.

The European leaders' summit ended in acrimony after David Cameron vetoed a new treaty to rescue the ailing euro and all other 26 EU members looked set to go ahead without him, leaving the UK in a minority of one.

The Prime Minister forced the 17 nations in the single currency to create a "treaty outside the EU treaty" to enforce budgetary discipline and prevent a repeat of the eurozone debt crisis. The other nine nations who are outside the euro deserted Britain and expressed their desire to join the "euro-plus" group.

Mr Cameron's veto, the first time a British Prime Minister has deployed one to block an EU treaty, came after he failed to win safeguards for the City of London. His unexpectedly tough stance delighted Conservative Eurosceptics but worried his Liberal Democrat Coalition partners, the most pro-European of Britain's main parties. Tory MPs called for a "new relationship" with the EU. A referendum on the UK's relationship with Europe is, however, unlikely before the next general election, as the Liberal Democrats could block it. But Mr Cameron will now come under immense pressure to include one in the Tory manifesto.

The Prime Minister insisted last night that Britain's membership of the EU is "good for us" and that – unlike some hardline sceptics – he did not want the UK to end up like Norway, part of the single market but with no say over its rules. "Of course this does represent a change," Mr Cameron said. "But the core of the relationship – the single market, the trade and the investment, the growth, the jobs – that remains as it was."

He insisted Britain's influence in the EU would be maintained and denied his actions had paved the way for British withdrawal.

Other European leaders claimed Mr Cameron's tactics had backfired. "This is going to cost the UK dearly," said one EU official. "It has antagonised everyone." Angela Merkel, the German Chancellor, said: "I really don't believe David Cameron was ever with us at the table. We're very pleased with the result. Yesterday was no weak compromise for the euro."

However, there are fears in the British Government that the euro stabilisation measures agreed at the summit will get the thumbs-down when the financial markets open on Monday. That would mean the crisis is not over – and that a disorderly break-up of the euro could yet plunge Britain into a prolonged recession.

Nick Clegg, the Deputy Prime Minister, defended Mr Cameron's stance but later acknowledged the disquiet in his own party by saying: "I think any Eurosceptic who might be rubbing their hands in glee about the outcome of the summit should be careful what they wish for, because there is an increased risk of a two-speed Europe in which Britain's position becomes more marginalised, and that would be bad for growth and jobs."

The summit was a clear victory for Nicolas Sarkozy, the French President, who had wanted a new treaty based on the 17-member eurozone. Six of the "outs" joined the intergovernmental agreement immediately and three others – Sweden, Hungary and the Czech Republic – look likely to follow suit.

A prolonged legal wrangle is in prospect over whether the "euro-plus" bloc can use EU institutions such as the European Commission and the European Court of Justice. Mr Cameron is adamant that they cannot, but his line was seen as untenable.

Mr Cameron insisted he had followed a "combined position" agreed by Tories and Liberal Democrats.

Guy Verhofstadt, former Belgian PM, said: "It was not wise of Cameron. He's putting himself outside of the club and this club is his main trade partner."