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UPDATE 1-UK's Cameron tells Europe: I can veto EU budget

(Adds quotes, details) By Matt Falloon

BIRMINGHAM, England, Oct 7 (Reuters) - British PrimeMinister David Cameron on Sunday threatened to scupper EuropeanUnion budget talks unless other members of the 27-nation blocagree to "proper control" of spending, without specifying whatwould be an acceptable settlement for Britain.

Cameron also lent his support to a proposal for two EUbudgets, one for the euro zone and another for cash-strappedBritain and the nations outside the single currency, but said itwould take some time to come to fruition.

The prime minister used Britain's veto in December to blockan EU-wide pact designed to help the euro zone, a move thatdelighted the anti-EU wing of his Conservative Party butdismayed his Liberal Democrat coalition partners and otherEuropean leaders, who eventually agreed a deal without Britain.

"People in Europe know I mean what I say. I sat round thattable - 27 countries, 26 of them signing up to a treaty - and Isaid this is not in Britain's interest. I don't care how muchpressure you put on. I'm not signing," he told the BBC.

"They know I'm capable of saying no ... and if I don't get agood deal, I'll say no again ... If we cannot get a deal thathas proper control of that budget, if they put forward ideas formassive increases, I won't say yes to it."

European leaders will debate the EU budget for the 2014-2020period in the coming months. In 2010, Cameron tried to get theEU to cut or freeze its 2011 budget but had to settle for amodest increase to howls of disapproval at home.

The prime minister is under pressure to take a tough linewith Brussels to pacify "eurosceptics" in his party who fear theConservatives will lose votes to the increasingly popularanti-European UK Independence Party at the 2015 election.

One of his newly-promoted cabinet ministers recently calledfor more "EU veto moments". Europe has divided the centre-rightConservatives for decades and helped to bring down the last twoof the party's prime ministers, Margaret Thatcher and JohnMajor.

Cameron says he wants Britain to remain part of the EU -Britain's biggest trading partner - but has pledged to avoidgetting entangled in costly solutions to the euro zone debtcrisis and to try to claw back powers from Brussels.

He has promised a referendum after 2015 on any future EUtreaty, but some Conservatives want Britain to renegotiate itsrelationship with Europe now, disappointed by Cameron's u-turnon a pre-election pledge for a plebiscite on the Lisbon Treaty.

"I'm not happy with the status quo, so I don't want to haveto say yes to the status quo," Cameron said. "But I also don'tthink it would be right to leave right now because we would bebasically coming out of the single market which our businessesbadly need to keep those markets open."

One area where Cameron could push harder is the issue ofEuropean immigration - a topic by which British politicalparties often gain votes by taking a tough stance.

"Two weeks ago, I visited two factories in a week, and Iasked the question how many people do you employ from other EUcountries, what's the balance? In one, it was 60 percent; in theother it was 50 percent," he said. "Now, heaven's above, we havegot so many unemployed people in our country."

(Editing by Mark Potter)

((matt.falloon@thomsonreuters.com))

Keywords: BRITAIN POLITICS/EUROPE