European Council President Donald Tusk said early this morning that he was more optimistic about finding a compromise with British Prime Minister David Cameron in February after a summit dinner discussed British demands for reform of the European Union.

"[W]e had a substantive and constructive discussion over dinner. I didn't want to sound too dramatic before the meeting, but I do believe that tonight was a make-or-break moment. Prime Minister Cameron set out in detail his position, in particular regarding benefits and free movement. He explained his request for a model based on four years and reiterated an openness to alternative solutions only if they could achieve the same objective. Leaders voiced their concerns but also demonstrated willingness to look for compromises. Building on this positive debate, we agreed to work together to find solutions in all four baskets raised by Prime Minister Cameron. Hard work on all baskets is still ahead of us," Tusk said.

Cameron told the 27 other national leaders over dinner that if they wanted to keep Britain in the EU, they must address British voters' concerns about immigration.

But despite some warm words of encouragement from European leaders, his push to curb welfare payments to migrants from the bloc was challenged by some for potentially breaking EU principles of non-discrimination and free movement of people.

"We are absolutely sure that we have to be tough when it comes to some red lines and fundamental values. And I can promise you that we, we will not give up when it comes to free movement or anti-discrimination, but I know today that David Cameron is looking for fair and but also substantive compromise and this is why I am much more optimistic today than before our meeting," Tusk said.

Cameron says he wants Britain to stay in the EU, but has hinted he could campaign for an exit if he fails to win an agreement that can reduce the influx of EU migrants, improve business competitiveness, give more sovereignty back to Britain and protect London's banks from discrimination by the euro zone.

MALTA'S POSITION

Prime Minister Joseph Muscat said Malta's position was that everything possible should be done for the UK to stay in the EU, but any flexibility granted to the UK should also apply to all the other member states.