German chancellor Angela Merkel has cautioned David Cameron not to use threats of a UK exit from the EU in his campaign to block a federalist candidate from taking the helm of the European Commission.
In a setback for the Prime Minister, Mrs Merkel restated her support for Jean-Claude Juncker as Commission president, following an overnight summit with Mr Cameron and the leaders of Sweden and the Netherlands at the Harpsund country residence of Swedish PM Fredrik Reinfeldt.
Speaking alongside the other leaders at a press conference concluding the summit, Mr Cameron made clear it would be "very unhelpful" to his plan to campaign for Britain to stay in the EU in a referendum in 2017 if the former Luxembourg Prime Minister becomes the Commission's most senior official.
Appointments to the EU's top jobs when the current Commission steps down in October must ensure that the 28-nation bloc is put "firmly on the path of reform", he said.
But the issue of the presidency was put on hold for the immediate future, as host Mr Reinfeldt said that all four leaders had agreed that "the future policy priorities of the European Union must be decided before we can decide on appointments to different top jobs".
Asked about reports that Mr Cameron had privately warned her that a Juncker presidency would make UK exit from the EU more likely, Mrs Merkel said: "I made myself clear by saying that I am for Jean-Claude Juncker. But when I made that statement in Germany I also made the point that we act in a European spirit. We always do that.
"Otherwise we can't arrive at a compromise. We cannot just consign to the backburner the question of European spirit. Threats are not part and parcel of that spirit, that's not how we usually proceed."
Mr Cameron said: "I want Britain to stay in a reformed EU. That is my goal. That is what I think is best for Britain and the best for Europe as well.
"The decision about whether to stay in Europe or to leave will be for the British people in a referendum by the end of 2017. Obviously the approach that the EU takes between now and then will be very important. If we can achieve reforms, if we can demonstrate openness, competitiveness, flexibility, less interference, reform - if people are capable of taking the EU forward in that direction that will be helpful.
"Obviously if the EU doesn't go in that direction that would be very unhelpful. I think it is very plain and very obvious."
Mr Cameron made clear that he would resist efforts by the European Parliament to claim the right to appoint the new Commission president, and insisted that national heads of government, sitting in the European Council, must be in the "driving seat" when setting a course for the EU.
"We have an opportunity with the new European Commission taking office to put it firmly on the path to reform," said Mr Cameron.
"The European Council, as the group of democratically-elected leaders of nation states, must, I believe, (be) the ones in the driving seat on this agenda. We should stipulate clear priorities for the EU for the next five years, with the over-riding priority of promoting jobs, growth and prosperity."
Mr Cameron, who joined the three other leaders yesterday to row around the lake in Mr Reinfeldt's boat, made clear that he was hoping for the support of the like-minded northern Europeans in driving forward EU reform to complete the single market in services, energy and digital, cut "burdensome" regulation and pursue trade deals with growing economies around the world.
And he said they had agreed to address "abuse" of the EU's free movement rules to ensure that migrants do not "free-ride on the back of welfare systems".
"We are four leaders working to confront the challenges that face the European Union, to address the problems that stir disillusionment amongst Europe's citizens," said Mr Cameron.
"I am confident that, by working together, we can reform the EU and make it stronger and more successful."
Mr Juncker is the candidate of the centre-right European People's Party (EPP) - the largest grouping in the European Parliament following last month's elections - but is regarded in London as an arch-federalist and opponent of reform.
Under the Lisbon Treaty, the European Council - made up of the leaders of the member states - is supposed to "take into account the elections to the European Parliament" in choosing a candidate for the presidency, who must then be approved in a vote of MEPs.
But Mr Cameron is seeking to secure enough allies to form a blocking minority in the Council against Mr Juncker under the qualified majority system, which gives added weight to the votes of bigger countries.
Labour has said its MEPs will not vote for Mr Juncker in the European Parliament, where the EPP is far short of an overall majority.
Dutch prime minister Mark Rutte echoed Mr Cameron's call for reform: "In order to preserve free movement of labour, we need a level playing field in the labour market. That means tackling abuses."
He said Europe needs to "work differently" and must go back to the "core tasks" of jobs and growth.
Summing up the conclusions of the four leaders' talks, Mr Reinfeldt said that: "We agreed on the necessity to take action to abolish remaining barriers on the internal market, to improve cost/benefit analysis of regulations and to already now start discussions with all member states on how to reform the next EU budget."
Mr Cameron's official spokesman said that the Harpsund summit had demonstrated agreement among the four leaders on "the need for reform of the EU", and insisted it was "not at all" the case that the Prime Minister had come away from Sweden with nothing because no breakthrough had been made on blocking Mr Juncker's presidency.
The spokesman pointed out that Mrs Merkel had previously accepted that there was no "automaticity" about the presidency going to the candidate of the largest grouping in the European Parliament and had acknowledged the importance of seeking consensus at the European Council.
Asked whether Mr Cameron would urge Mr Juncker to withdraw his candidacy, the spokesman said: "It is understandable that candidates may wish to put themselves forward and make the case for their approach. I am sure that that will continue.
"But... the role of the European Council... is to seek as much consensus as possible around the reform priorities, and that is going to continue."
Shadow foreign secretary Douglas Alexander said: "Of course Europe needs to change, but David Cameron has so far been unwilling or unable to set out any detailed EU reform plans of his own.
"Labour wrote to David Cameron last month setting out five specific and achievable changes to make Europe work better for Britain, and called on him to adopt these proposals or set out his own detailed agenda for reform.
"The appointment of a new Commission later this month now provides a vital window of opportunity which must be seized, not squandered."