The Prime Minister and Angela Merkel spoke last night on the phone to discuss the European Council meeting later this week. Downing Street said the pair ‘agreed that further work is needed before agreement can be reached’ on banking union, which is a coded acknowledgement that David Cameron is concerned the current proposals are not in Britain’s interest and do not currently protect the single market and that he will push for greater compromise when leaders meet.

This is all part of the Prime Minister’s big Europe week. He has a Cabinet meeting this morning, and as its members are increasingly piling pressure on Cameron for a referendum on Britain’s membership of the European Union, the topic may well come up. They might discuss the speech he plans to make later this year on Europe, which Rachel Sylvester suggests in her column today could include a pledge for a post-2015 renegotiation of Britain’s relationship with Brussels which would be put to a referendum. James revealed back in May that a promise on a referendum would almost certainly feature in the next manifesto.

Merkel is already worried about Britain’s relationship with Brussels, though. The Mail quotes a report in Der Spiegel, which says the German Chancellor believes that ‘the Cameron administration’s unwillingness to compromise leaves the German government with no choice. In reality the Chancellor has long since come to terms with the fact that there will no longer be a path back to the centre of the union for the British.’ Yesterday’s announcement in the Commons on plans to opt out of law and order measures will have underlined that. It is not a good sign that Merkel sees Cameron as intractable and unwilling to compromise when he hasn’t even started the renegotiation process.

Tags: Angela Merkel, David Cameron, EU referendum, Single market, UK politics