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Chancellor George Osborne has insisted the UK will pursue its "national interest" in Europe despite German warnings about its future in the EU.

Mr Osborne said the British people wanted concerns about EU immigration and access to benefits addressed.  The German government has insisted the right of EU nationals to live and work in other member states is sacrosanct.  Angela Merkel has reportedly said she would rather see the UK leave the EU than allow a quota system for migrants.  The BBC's Europe Editor Gavin Hewitt said the German chancellor wanted the UK to stay in.  But he said an article in Der Spiegel news magazine, which quoted German government sources as saying she feared the UK was near a "point of no return", signalled Berlin's view that British calls for curbs on the free movement of people was a "red line" that could not be crossed.  David Cameron wants to renegotiate the terms of the UK's continued membership before holding an in-out referendum, if he remains in power after next year's general election.  The prime minister, who is expected to set out his next steps on immigration before Christmas, has insisted freedom of movement of workers would be "at the very heart" of his renegotiation strategy.  Der Spiegel reported that Mr Cameron was now looking at a plan to stretch the EU rules "to their limits" in order to ban migrants who do not have a job, and to deport those who are unable to support themselves after three months.

Speaking to journalists on Monday, Mrs Merkel's spokesman - Steffen Seibert - said this was "not a bilateral matter between Germany and Britain but between Britain and all of its European partners".

It was up to the UK to "clarify" what wider role it wanted to play in the EU, he added.

Mr Osborne said a Conservative government would always "do what is in the interest of our country and our economy" but the UK would approach future negotiations in a "calm and rational" way.

Tory backbencher David Davis: Merkel's warning is "bloodcurdling"

"What we have today is a story based on speculation about what Angela Merkel might have said about something David Cameron might say in the future," he told BBC Breakfast.

"The Germans understand the disquiet caused among the British people when you have people coming from other parts of Europe to claim our benefits who do not necessarily have jobs to go to."