Campaigners for a major renegotiation of Britain's membership of the European Union have recently suffered a serious set-back.

A senior UK government source has revealed that Prime Minister David Cameron will not seek the return of powers from the EU in exchange for his agreement to a forthcoming EU deal setting out new fiscal rules for the euro-zone.

In a recent debate in Parliament about whether there should be a referendum on Britain's EU membership, the government tried to create the illusion that they might try to 'rebalance' the country's relationship with the EU as a means of dissuading Conservative members of Parliament from supporting a referendum.

Speaking in the House of Commons, Foreign Secretary William Hague said "It is my view and the Prime Minister's view and the position of the Conservative party that we will use future opportunities to bring further powers back... to repatriate powers to the United Kingdom in those areas where we believe European integration has gone too far."

No specific policy areas were identified and no timescale outlined. Now that the referendum debate has passed, it seems to be emerging that the government has no such intention.

Speaking to the media, the un-named government source said of the renegotiation idea, "I don't think that anyone is seriously proposing going down that route". Elsewhere, it was also reported that David Cameron will confirm that "Britain is not planning to demand the repatriation of social and employment laws during the treaty negotiations over the next year."

As the euro-zone debt crisis rumbles on, political leaders aim to draft treaty changes that will transfer greater powers of 'economic governance' to the EU.

Measures are reported to include the requirement for national governments to submit their annual budget to the EU for approval and the right of a 'European Monetary Fund' to take over the running of the economies of euro member countries deemed to have been financially irresponsible.

Campaigners had hoped that David Cameron would take this opportunity to demand opt-outs from a range of EU rules seen as damaging to the UK economy. Yet others have doubted the possibility of renegotiation from within the EU, since a return of powers from the EU to any member country would require the agreement of the 26 other EU members.

A government seeking to change its labour market rules by securing opt-outs from EU social and working time directives may be perceived as seeking to gain a competitive advantage over its fellow EU member countries, so such a change in particular is unlikely to receive their agreement.

For this reason, German Chancellor Angela Merkel, other EU leaders and the European Commission have always maintained that they would not tolerate de-centralising important powers back to an EU member country. In addition, Britain's Liberal Democrat party have made it crystal clear that they will not support their Conservative coalition partners in any attempt to play hardball with the EU over future treaty changes.

Campaigners for change in the relationship between Britain and the European Union now face the choice of holding on to the concept of renegotiation despite the government ruling out any such intention even when a clear opportunity presents itself, or facing up to the much bigger question about whether Britain should leave the current EU treaty and negotiate a fresh deal along the lines they seek.