Liam Fox urges government to issue 'quit EU' ultimatum
Former Defence Secretary Liam Fox has recommended that the UK should leave the European Union unless there is a rebalancing of their relationship.
He said coalition policies were "being curtailed by diktat from Brussels" and urged a referendum on the issue.
The comments will add to pressure on David Cameron who is due to address MPs later on last week's EU summit.
The prime minister has said he is prepared to consider a referendum, but urged campaigners to show "patience".
Mr Cameron's House of Commons statement at 1530 BST follows last week's EU summit in Brussels at which eurozone leaders agreed a bailout deal for their debt-laden banks.
As a non-eurozone leader he was not present during these discussions, but afterwards he insisted he had secured "explicit commitments" to protect the European single market.
Many Eurosceptics fear the UK could lose out in a "two-tier Europe", as eurozone economies integrate further as they work to deal with the debt crisis.
In his speech organised by the Taxpayers' Alliance in London, Mr Fox suggested this could alter the whole set-up of the EU, insisting that "life outside the EU holds no terror".
However, he said holding a referendum now "would be a huge error with enormous tactical risks", and that the UK should first seek to "negotiate a new relationship with the EU based on economic rather than political considerations, and set out in clear and unambiguous language".
If this failed, there would be "no alternative but to recommend rejection and consider departure from the EU".
He added: "We should not wait for EU leaders to recognise the failure of the ill-conceived euro before we set out what we want for the British people. Britain's destiny is not a debating issue for leaders on the Continent."
Mr Fox, who resigned last year after it was found he had breached the ministerial code in his working relationship with friend Adam Werritty, is seen as a leading figure among Conservative Eurosceptics.
He said that, when the referendum on staying in the then European Economic Community had taken place in 1975, voters had been "sold a pup", with intended movement towards ever-greater political union not publicised.
It would be in the UK's national interest to retain the "customs union", but "not other elements I regard as an intrusion into our national life".
Mr Fox also said the EU was "not foreign enough", as it did too little to foster trade with growing markets such as China and had become "increasingly uncompetitive" globally by extending rights and benefits.
He described the latest Brussels summit as "Groundhog Day", adding: "What really happened was that fiscally incontinent banks, and nations, sought to avoid their responsibilities and kick the problems, yet again, into the long grass."
Mr Fox was asked about a possible return to government, replying that he would have remained in office for "about 25 minutes" had he made his comments while in office.
He said: "There are some freedoms on the back benches... there are not a huge number of benefits, but there are some and this is one of them."
His comments come amid growing backbench demands for a public vote on the UK's relationship with Brussels.
Last week Conservative MP John Baron said almost 100 colleagues had signed a letter calling on the prime minister to prepare legislation committing the UK to an EU referendum after the next election.
The prime minister responded that he "completely" understood concerns, but after the EU summit ended on Friday he rejected the idea of an in/out referendum and stressed the need to "shape a relationship with Europe that benefits the United Kingdom".
Mr Cameron clarified his views in the Sunday Telegraph, writing that he was "not against referendums on Europe" but that he did not agree with those who wanted "the earliest possible in/out referendum".
He acknowledged the need to ensure the UK's position within the European Union had "the full-hearted support of the British people" but they needed to show "tactical and strategic patience".
Europe is seen as a divisive issue within the coalition government, with the Conservatives broadly less in favour of the EU than their Liberal Democrat partners.
Deputy Prime Minister Nick Clegg, and Lib Dem leader, said that "the ink is barely dry" on legislation that would trigger a referendum if more powers were transferred to Brussels.
He added: "David and I spoke about it. He is entirely entitled to talk as leader of his own party. This is a coalition. You have two people at the top with two different instincts on this."
He added: "It is clearly not a priority now to have an abstract debate about a referendum on a question which is not yet specified on a date which is not yet specified on a set of circumstances which is not yet specified."
UK Independence Party leader Nigel Farage said leaving the EU should be among the choices presented to voters, arguing: "If we are just going to have a fudged referendum on 'do we stay in or go further?' then that's not good enough."
Shadow chief secretary to the Treasury Rachel Reeves refused to rule out the possibility of a future Labour government holding a referendum once the new shape of Europe became clearer, but called the prime minister's stance on Europe "a shambles".
Lib Dem Member of the European Parliament Sir Graham Watson described Dr Fox's speech as "a desperate move by a discredited Tory to bang the populist drum to try to revitalise an ailing political career".