ANGELA Merkel has said she is prepared to consider renegotiating Britain's membership of the EU in the wake of David Cameron's landmark speech pledging an in-out referendum by 2017.
The revised relationship would then be the subject of a referendum in which he would campaign for Britain to remain a member – if the Tories win the next election.
There were signs last night that the German and Dutch governments will support exploratory talks over a new European deal, while Downing Street welcomed the backing of prominent business figures.
But the issue was threatening to spark turmoil within the Labour Party after Ed Miliband, its leader, initially appeared to rule out supporting a referendum only for other senior figures to suggest this may not be the case in the years ahead.
The decision by Mr Cameron to offer an apparent guarantee to hold a referendum appeared to satisfy Conservative backbenchers and to help head off a threat from UKIP.
However, the practicalities of renegotiating the thousands of different laws which define Britain's EU membership could reopen old fault lines.
In yesterday's speech, Mr Cameron said that "nothing should be off the table". He called himself a "heretic" for challenging the apparent consensus over the EU.
In an unexpected intervention later, the German Chancellor said that she was "prepared to talk about British wishes".
Mrs Merkel said: "We are prepared to talk about British wishes but we must always bear in mind that other countries have different wishes and we must find a fair compromise. We will talk intensively with Britain about its individual ideas but that has some time over the months ahead."
The Dutch Government also complimented the speech.
Mr Cameron promised to personally campaign for Britain to stay in the EU after renegotiating a better deal and clawing back some powers from Brussels.
"It does not seem to me that the steps which would be needed to make Britain - and others – more comfortable in their relationship in the European Union are inherently so outlandish or unreasonable," he said.
However, he gave little detail about which powers he wished to repatriate, indicating only that the system should offer more flexibility to states not in the euro.
"We cannot harmonise everything. For example, it is neither right nor necessary to claim that the integrity of the single market, or full membership of the European Union, requires the working hours of British hospital doctors to be set in Brussels irrespective of the views of British parliamentarians and practitioners.
"In the same way, we need to examine whether the balance is right in so many areas where the European Union has legislated, including on the environment, social affairs and crime. "
Mr Cameron also said that many problems blamed on the EU were actually legal judgments from the European Court of Human Rights. Mr Cameron warned that Britain's international influence and economic power risked being undermined by leaving the EU.
He added: "If we leave the EU, we cannot of course, leave Europe. It will remain for many years our biggest market and forever our geographical neighbourhood. We are tied by a web of legal commitments.
"Hundreds of thousands of British people now take for granted their right to work, live or retire in any other EU country." The speech was warmly welcomed by most Conservatives.
Bernard Jenkin, a member of the 1922 back-bench committee, said the commitment to give voters a say was "a very, very big moment in British politics".
However, Tony Blair, the former Labour prime minister, said Mr Cameron faced a major challenge in securing the support of all other EU leaders to back treaty changes and repatriate powers.
The French government indicated it may prove an obstacle. President Francois Hollande, said: "The UK can perfectly well decide in a referendum to stay in or leave the European Union. But what I say on behalf of France, and also as a European, is that it is not possible to negotiate Europe for this referendum."
Jose Manuel Garcia-Margallo, the Spanish foreign minister, accused Mr Cameron of playing a "very dangerous game". Mario Monti, the Italian prime minister, said: "I think the EU does not need unwilling Europeans."
(© Daily Telegraph London)