BRUSSELS (Reuters) - Britain's European partners voiced reservations but no outright rejection of a draft deal to meet its demands for reformed EU membership terms on Friday when negotiators from the 28-nation bloc met for the first time to discuss the text, diplomats said.
London's bid to win exemption from the European Union goal of "ever closer union", preserve its financial sector from regulation by the euro zone and curb access to in-work benefits for EU migrant workers won backing from Poland as the meeting of national negotiators - or sherpas - began in Brussels.
The powerful leader of Warsaw's new ruling party, Jaroslaw Kaczynski, said after meeting British Prime Minister David Cameron that he was satisfied that the proposals would protect the rights of some 600,000 Polish workers already in Britain.
Brussels set out a plan this week to deliver on changes requested by Cameron to enable him to campaign for continued EU membership when Britons vote in a referendum, possibly as soon as June.
The British leader faces an uphill struggle according to an opinion poll on Friday that gave campaigners for a British exit from the bloc a nine-point lead, and he is under pressure at home to secure stronger assurances.
As negotiators crunched details of the proposal laid out by European Council President Donald Tusk, other countries were keen to spell out the limits of what they could accept.
"Initial reactions from capitals to Tusk's proposal showed that nobody is happy, which is a sign that the proposal is fair and balanced, but could also be a sign that it could be hard to agree," one EU diplomat said.
Another said France wanted guarantees that arrangements to reassure non-euro member Britain that the 19-nation zone would not impose rules on countries that keep their national currency would not give such states the right to block decisions taken within the single currency bloc.
The second source said Tusk had secured French President Francois Hollande's agreement to the formulation on the euro zone before issuing the draft document. But the negotiators would now have to examine the text "comma by comma".
The proposal would allow Britain to have different bank capital rules, a fact that caused the European Banking Authority watchdog to warn on Friday that the deal risked distorting competition.
London also would be allowed to freeze in-work benefits for new migrants, a move seen as discriminatory and initially causing uproar in several eastern EU members from which many people have emigrated to Britain since 2004 in search of better jobs and lives.
But Poland, by far the biggest source of migrant labor, has reoriented its foreign policy after a eurosceptic government took power in November. Its foreign minister last week named Britain, rather than Germany, as Warsaw's top ally in Europe.
The negotiations have focused on finding technical formulas to meet London's demands without explicitly violating EU law in order to prevent a "Brexit", which would be an unprecedented setback after decades of European integration.
But some diplomats are concerned that the draft undermines the founding principles of the bloc.
"We won't pick a fight but really if this goes through, this is the end of the EU as we know it," said one diplomat involved in the process.
Reporting by Jan Strupczewski and Gabriela Baczynska in Brussels, Yves Clarisse in Paris, Paul Carrel and Andreas Rinke in Berlin, Editing by Paul Taylor and John Stonestreet