Bulgaria's president accused David Cameron yesterday of damaging Britain's image over plans to toughen immigration rules that smack of a switch to "isolation and nationalism."

Rosen Plevneliev was responding to comments made by the PM to clamp down on "benefit tourism" that he said could follow lifting restrictions on the free movement of Bulgarians and Romanians across the EU on January 1.

Mr Plevneliev told the Observer: "You want to make a plan for a better future for your citizens in Great Britain. In the past 20 years immigrants in Great Britain contributed heavily to its prosperity and that is a fact. The only thing that is important is not to listen to populist politicians who play on people's fears but to listen to the wise men in Great Britain.

"Listen to the institutions which are giving the facts. University College London has very clear data showing that in the past 20 years immigrants contributed 34 per cent more than they took out. You guys are making profit out of this."

The issue has led to further coalition tensions with Business Secretary Vince Cable insisting that a cap on EU migrants is "not going to happen" and accused the Tories of being in a "panic" over immigration.

Referring back to previous periods of heightened tensions, including Enoch Powell's notorious "rivers of blood" speech, the Liberal Democrat warned politicians they had a responsibility to "give the facts" and not "resort" to populist tactics.