The European Union faces a "crisis in political leadership" and must change to win back public support, Prime Minister Tony Blair has told Euro MPs.
Blair: Europe must change
Mr Blair, outlining plans for the UK's six-month EU presidency, argued the EU would fail "on a grand scale" if it did not face up to globalisation.
"Only by change will Europe recover its strength, its relevance, its idealism" and therefore public support, he said.
EC president Jose Manuel Barroso said consensus was vital to avoid paralysis.
Pointing to last week's turbulent talks over the EU budget, Mr Barroso said the union faced a "decisive moment".
The EU presidency would be a test of the UK's historic pragmatism during its presidency, he added.
Last week's summit saw clashes over the UK refusal to give up its £3bn annual refund from the EU budget unless there were reforms to farm subsidies.
Mr Blair said he did not think Europe quite realised the competitive challenge it faced from countries like China and India.
He was met with both heckles and applause when he said he had always been a "passionate pro-European". He insisted he wanted to reinvigorate the EU, not wreck it.
He argued the French and Dutch voters' rejection of the draft European constitution reflected a wide discontent with the EU.
"This is not a time to accuse those who want Europe to change of betraying Europe," he argued.
"Ideals survive through change, they die through inertia in the face of challenge."
Mr Blair denied he had been unwilling to discuss the UK rebate or that he had demanded the Common Agricultural Policy (CAP) be renegotiated overnight.
But it would be too late to wait until 2014 to begin to change the fact that 40% of the EU budget was currently spent on agriculture, for example, he said.
Mr Blair hit out at the caricature of an "Anglo-Saxon market philosophy that tramples on the poor and disadvantaged".
He argued he did not want to ditch Europe's social model but asked how it could allow 20m to be unemployed and fall behind in research and development.
French Foreign Minister Philippe Douste-Blazy later delivered a rebuff to calls for a shake-up of the EU budget, making clear that France was not willing to renegotiate the 2002 deal on farm subsidies.
Speaking in London after G8 talks, Mr Douste-Blazy said all countries wanted to prepare Europe for the future.
"Being modern today means wanting more Europe, it is not wanting less Europe," he said.
The French minister said he was sure Mr Blair wanted to use the EU presidency to bring people together, not to divide.
"The role of the presidency is above all to create consensus, to bring off compromises," he said.
US Secretary of State Condoleezza Rice, also attending the G8 talks, said Washington wanted to see a "strong and united" Europe, but she declined to get involved in the current row over its future direction.
Dr Rice said the US hoped the EU would not turn its back on further enlargement but would continue to hold out the prospect of membership to countries such as Turkey.
Conservative shadow Europe minister Graham Brady backed Mr Blair's call for reform but said Mr Blair had supported a constitution which would have locked Europe into more central control and regulation.
Liberal Democrat foreign affairs spokesman Sir Menzies Campbell said: "The prime minister's analysis is right, but the real test of his presidency of the European Union will be his ability to provide solutions which command universal approval among the other member states.
"Britain must avoid adopting an attitude of condescension and omniscience to its partners. The logic of CAP reform is unchallengeable, what is required are the political skills to make it viable."