UK optimistic of European Union deal but France downbeat

British Prime Minister David Cameron said he was optimistic of securing a deal in February to reform the European Union after France warned that his demands could not be met at any price.

As attention at the annual gathering of the rich and powerful in Davos, Switzerland, turned to the spectre of a so-called Brexit, Britain got warmer words from EU powerhouse Germany and the Netherlands.

"I very much hope that we can, with the goodwill that is clearly there, reach an agreement at the February European Council. I would like that," Cameron told an audience of billionaires and global leaders in the ski resort.

Cameron has said he wants to land a deal with his fellow EU leaders by February so that he can campaign to stay in the bloc ahead of a referendum on membership, which he has promised to hold by the end of 2017.

French Prime Minister Manuel Valls said earlier on Thursday a British EU exit would be a "tragedy", but warned that Cameron's demands for reform could not be met at any price.

A British EU exit would be "a very bad thing," Valls told reporters in Davos.

"There needs to be a deal, but not at any price," the French prime minister said.

"Anything that allows us to simplify the organisation of Europe, yes. Anything that throws into doubt the foundations of the European project or the eurozone, no."

Valls said Cameron was unlikely to win over fellow EU leaders by the time of their February 18-19 summit in Brussels, at which France will be represented by President Francois Hollande.

Negotiations on London's demands only started a short time ago, Valls pointed out, though he still hoped a solution could be found in February.

Cameron has said he wants to land a deal with his fellow EU leaders by February so that he can campaign to stay in the bloc ahead of a referendum on membership

German encouragement

In contrast to France's downbeat assessment, Cameron received encouragement from Germany and the Netherlands.

Germany's veteran Finance Minister Wolfgang Schaeuble warned of the danger a Brexit would present to the EU.

"I hope that the British will stay in Europe and with us," Schaeuble said in Davos. "It would be a disaster otherwise."

Dutch Prime Minister Mark Rutte said the EU needed more of Britain's economic "culture" and said he believed a deal could be done in February.

Cameron insisted he was prepared to bide his time if he was not satisfied with the progress of negotiations.

"If there's a good deal on the table I will take it," he said in Davos, where he gave a presentation in a solo session.

"But I do want to be very clear, if there isn't the right deal, I'm not in a hurry, I can hold my referendum at any time up until the end of 2017 and it's much more important to get this right than it to rush it.

"I want to confront this issue, I want to deal with it, I want to put that question to the British people in a referendum and go out and campaign to keep Britain in a reformed EU," he added.

Cameron's most hotly contested proposal is a four-year ban on top-up benefits for EU migrants working in Britain, which critics say is discriminatory and threatens freedom of movement in the EU.

The British leader also wants the EU to give Britain safeguards against more political integration, to protect countries that do not use the euro currency and to boost economic competitiveness.

Cameron warned in a French TV interview later that if he did not get the concessions he wanted, he could still campaign for a British exit.

"What I hope and my aim in all this is to secure Britain's place in a reformed European Union," he told TF1.

"But of course if we can't achieve the things we have set out I have always said I rule nothing out."

In Paris, Hollande said he would be "particularly vigilant" during talks with Britain to ensure the eurozone was not affected.

"The British government has made its demands... nothing is insurmountable so long as the founding principles of the union are preserved," Hollande told a gathering of French ambassadors.

A European Union spokesman in Brussels said the "clear intention" was to strike a deal with Britain in the February meeting and no other summit had been scheduled.