Merkel warned David Cameron

Chancellor Angela Merkel has reportedly warned David Cameron she would rather see the UK leave the EU than compromise over the principle of free movement, reports

 Der Spiegel news magazine quotes German government sources as saying she feared the UK was near a “point of no return”.

 Chancellor George Osborne dismissed the story as speculation about how Germany may react to a future UK policy shift.

 But he insisted ministers would act in the national interest in addressing public concerns about immigration.

 He told BBC Breakfast that concerns about abuses of the benefit system were causing “great unhappiness” but the UK would approach future negotiations in a “calm and rational” way.

 Mr Cameron wants to renegotiate the terms of the UK’s continued membership before holding an in-out referendum.

 The prime minister has insisted that freedom of movement of workers would be “at the very heart of my renegotiation strategy for Europe”.

 But Mrs Merkel is said by the magazine to have made clear she will withdraw her support for the UK’s continued EU membership if he continues to push for migration reform which requires fundamental changes to the principles of the organisation.

The German chancellor’s warning to Mr Cameron is reported to have come in a meeting on the fringes of the latest EU summit in Brussels last week.

Der Spiegel, quoting sources within the German chancellor’s office and German foreign ministry, said this was the first time Mrs Merkel had acknowledged that the UK’s exit from the EU was possible.