David Cameron has insisted he would take action to defend British national interests in Europe if a new fiscal deal between other member states threatened UK powers.
After an EU summit deal on a new treaty provision to tighten eurozone discipline the Prime Minister moved to counter eurosceptic fears that his opposition was weakening.
He then warned that any changes the others made under their alternative fiscal pact - excluding Britain - could not use EU institutions such as the Commission and EU court because they could only carry out policies applying to all 27.
At Monday's talks Mr Cameron did not try to push his case against using institutions, but warned: "We will only take action if our national interests are threatened - and I made clear today that we will be watching this closely."
The Prime Minister told the Press Association: "They [the other member states] have today agreed on a new treaty focused on tighter fiscal discipline which we agree is essential.
"Now this is a totally separate treaty - because we vetoed an EU treaty in December.
"We're not signing this treaty. We're not ratifying it. And it places no obligations on the UK.
"But, as I said in December, this is new territory: it has only been agreed today. It has yet to be ratified or implemented."
Mr Cameron said he had "a number of legal concerns" about what the others had agreed, adding: "That's why today I reserved the UK position on it."
He explained: "We don't want to hold up the eurozone doing what is necessary to solve the crisis as long as it doesn't damage our national interests, so it's good that the new treaty states clearly that it cannot encroach upon the competences of the Union and that they must not take measures that undermine the EU single market."
Mr Cameron said that "while tough fiscal discipline" was essential it was vital that the eurozone also recapitalised their banks, "end the uncertainty in Greece, and establish a firewall big enough to deal with the crisis".
"These measures cannot wait. The risks are too great. They are the immediate steps necessary if the single currency is to succeed."
The president of the European Council, Herman van Rompuy, said 25 of the 27 EU members would be signing the pact at the next summit in March. The Czech Republic has not yet made up its mind and remains outside the pact, with Britain.