However, he added: “It follows from our desire to have a renegotiation that we must also be prepared to say, OK, fair enough, we can’t get the terms that are suitable, then we will walk away.”
He said the debate about the future of the EU was happening all across Europe, not just in the UK because of the “stratospheric unemployment rates”, arguing that the single currency was driving change to democracies.
Europe is “not competitive enough, open enough or flexible enough”, Mr Cameron said, adding Europe “must be flexible enough to accommodate” countries that are members of the single currency and those that are not.
He vowed to “stand up and defend” the UK’s financial services industry, particularly against damaging legislation from Brussels. The City is a “massive advantage” to the UK, he said, and warned that “we shouldn’t spend our time in politics bashing banks.”
He said that European leaders shouldn’t be “surprised” that the UK has opposed efforts to cap bonuses and introduce a financial transaction tax since London hosts 40pc of the EU’s financial services sector.
The Prime Minister said Britain faced a “sink or swim moment” in a global economic race and must drive economic reforms, including a new relationship with Europe, to stay on top.
He said the Government is driving through tax reductions, welfare reforms, infrastructure investment and trade deals to ensure the UK stays competitive globally.