Donald Tusk remains optimistic despite David Cameron’s ‘unacceptable’ demands

European leaders tackled the migration crisis and Britain’s reform demands at a summit on Thursday, twin challenges threatening the unity of the EU as one of the toughest years in its history draws to a close.

While the other EU leaders sought to be accommodating to several British demands to streamline bureaucracy and increase efficiency, they insisted they would not compromise core values to limit largely unfettered movement in the bloc and discrimination between EU citizens, even it meant losing one of the biggest EU assets. “We say that the state must give consent”, said Greek European Affairs Minister Nikos Xydakis.

Separately, Mr Juncker said: “We will enter the concrete and vital phase of negotiations with our British colleagues, the Commission is ready to look for other options to the single one proposed by the British Prime Minister and I am quite convinced that we will find an answer to that highly complicated question”.

After appealing to sceptical European Union counterparts for help at a dinner in Brussels, Cameron said afterwards there was a “pathway” to an agreement but that it would be “tough” to hammer out differences over his demand for a freeze on benefits for European Union migrants. Hard work on all baskets is still ahead of us. Particularly grating on member states is a plan for a four-year ban on in-work benefits for migrants, something many feel amounts to discrimination.

Notwithstanding those objections, the midnight atmosphere was that a deal could still be possible.

German chancellor Angela Merkel assured Mr Cameron he would have a friend in Germany in his quest to renegotiate fundamental parts of European Union legislation if he stayed within the lines of the European Union treaty. They include changes in European Union law to limit or delay access to unemployment benefits for new arrivals from other European Union countries; reducing some child benefit payments to children not resident in the United Kingdom; preventing convicted criminals from using free movement rules to avoid being expelled or returned to their home country; and making European Union funding available to support public services under pressure from high inward migration.

“Where there is a will, there is a way”, Merkel said after hearing Cameron’s 40-minute speech to leaders.

“Here in Brussels, we are going to have a conversation dedicated to Britain’s renegotiation of its position in Europe, and I want to see real progress on all the four areas I have mentioned”, he said.

An EU aide said Tusk wanted to give everyone a chance to speak their mind on Thursday night with a view to seeking a deal at the next summit on February 17-18. A February summit is seen as the first opportunity to clinch a reform deal, though a planned March summit would seem more likely.

Former prime minister John Major made his argument for staying in the European Union on the eve of the summit, saying any departure would leave Britain in risky “splendid isolation” and could lead to the break up of the country.

The debate in Britain has also been fuelled by concerns over the migration crisis – the worst of its kind in Europe since the Second World War – which has seen almost a million people arrive on the continent this year. “Allow Britain to stay in the European Union, maintain the European Union principles while at the same time pushing through essential reforms”, he said.