British Prime Minister David Cameron said on Friday that he took a "tough but good" decision in blocking a change to the EU treaty presented by France and Germany as EU leaders have instead decided to work on a separate pact to tackle the debt crisis for the eurozone.
The clash between non-eurozone member Britain and France overshadowed a pledge to pump $267 billion into IMF coffers.
"Where we can't be given safeguards, it is better to be on the outside," said Cameron, who failed to secure a halt of ongoing EU efforts to curb the City of London's huge financial services sector.
A square mile in central London is home to 75 percent of Europe's entire financial services industry, but the British government is resisting French and German moves to impose a financial transactions tax.
French President Nicolas Sarkozy described Cameron's demand as "unacceptable." EU president Herman Van Rompuy said that the 17 states that share the euro, plus six others of the 27 member bloc, would ink an accord to make greater discipline legally binding.
Alongside Britain, Hungary will remain on the outside, while Sweden and the Czech Republic are still considering their positions.
In a meeting billed as a last chance to save the euro, the leaders also took critical decisions on the permanent bailout fund, the European Stability Mechanism (ESM).
It was decided that the ESM's capacity would be capped at $666 billion, less than had been suggested was possible before the summit, and that the facility would not get a banking license, as Van Rompuy originally had proposed.
Markets appeared to be less upbeat despite the decisions made in the summit, with Asian markets falling on Friday.
The danger of Cameron's decision to stay out of the treaty-change camp is that if a large majority of EU countries do push ahead with deeper integration, it could involve changes to the single market and financial regulations, both of which could have a profound impact on the British economy.
"Cameron was clumsy in his maneuvering," a senior EU diplomat said. It may be possible that Britain will shift its position in the days ahead if it discovers that isolation really is not a viable course of action, diplomats said.
If Britain does stay out, not only could it mark an irrevocable split with the EU, which it joined nearly 40 years ago, but it will leave the rest of the EU and eurozone to institutionalize a "two-speed" Europe.