Prime Minister Cameron and Chancellor Merkel have said it's in both the EU's and the UK's interests for Britain to stay in the 28-member bloc. Avoiding a "Brexit" is set to be on leaders' agendas for weeks to come.

British Prime Minister David Cameron and German Chancellor Angela Merkel

German Chancellor Angela Merkel and British Prime Minister David Cameron expressed confidence that a deal could be reached that would keep Britain in the EU.

"When it comes to the question of Britain's place in Europe, I have always been confident that together we can secure the reforms that address Britain's concerns and also work for Europe as a whole," Cameron said at a banquet in Hamburg, where he was a guest of honor alongside Chancellor Angela Merkel.

"When it comes to the question of Britain's future in Europe, my aim is clear: I want to keep Britain inside a reformed European Union," Cameron said at Hamburg's historic "Matthiae-Mahl" banquet, which is the oldest banquet in the world.

"If by working together we can achieve these changes, then I will unequivocally recommend that Britain stays in a reformed European Union on these new terms."

Conserving Britain's character in a reformed EU

The prime minister underlined that he also had to protect Britain's sovereignty, saying he would make "no apology" for Britain's position with regards to the EU.

The tradition of the Matthiae-Mahl banquet in Hamburg dates back to the 14th century

"We have the character of an island nation - independent, forthright, passionate in defense of our sovereignty - and of institutions that have served us well for many hundreds of years," he explained. "But we are also an open nation. And I never want us to pull up the drawbridge and retreat from the world."

Cameron has been trying to renegotiate the terms of Britain's EU membership before holding a referendum on Britain's EU membership before the end of 2017. Cameron has to convince EU leaders to back the reform proposals at a leaders' summit in Brussels to be held on February 18-19.