David Cameron has said he will take "legal action" if EU institutions are misused by the countries who signed up to the fiscal treaty he vetoed last month.
"I made clear we will watch this closely and if necessary we will take action, including legal action, if our national interests are threatened by misuse of the institutions," the prime minister warned as he updated MPs on Monday's informal EU summit.
But Ed Miliband challenged Cameron, saying it was clear "a veto is not for life, it's just for Christmas."
Cameron and Osborne asked "would you sign it?", as the Labour leader claimed "the phantom veto of December is now exposed."
Miliband said: "It talks like a European Treaty, it walks like a European Treaty, it is a European Treaty."
"He made a grand promise which turned out to be worthless. No wonder even his backbenchers say they can't believe a word he says," Miliband said, to cheers from the Labour benches. "Britain deserves better."
"This is a treaty outside the EU", Cameron told MPs: "We are not signing it, we are not ratifying it, we are not part of it, and it places no obligations on the United Kingdom.
"It doesn't have the force of EU law for us, nor does it have the force of EU law for the EU institutions, nor does it have the force of EU law or the countries who sign it.
"There will be no inner group of EU countries distorting the single market from inside the EU treaty. That is the fundamental protection we secured with our veto in December and that protection remains."
The prime minister also faced backbench anger after appearing to soften his stance on his December veto. He was asked by Conservative MP Mark Reckless to explain "what it is" he had vetoed in December.
After David Cameron spoke in the Commons a Number 10 spokesperson said Britain wasn't the only country in the EU with concerns about the emerging legal framework.
"Britain will use the legal uncertainty to gain leverage," said the spokesman, who wouldn't be drawn on what that leverage would involve. Downing Street believes the new treaty among Eurozone members will be signed on the 1st of March, but it could take more than a year for all the countries to ratify it.
On Tuesday morning Ed Miliband accused Cameron of selling Britain "down the river" having not secured protection for British interests.
"I'm very concerned about what David Cameron has done because he trumpeted last December that he got a great deal for Britain, " he told ITV's Daybreak.
"Now he seems to have sold us down the river on a lot of things so I'm going to be asking him in the House of Commons today what exactly has he agreed to, what protections has he got for Britain."
At lunchtime, former Conservative Europe minister and the man who stood against Cameron for the Tory leadership David Davis predicted the Commons would not be "hostile" toward the PM.
"I don't think the House will be hostile, I think it is just going to be worried that what it thought was a veto is turning into something else," he told BBC Radio 4's The World At One.