The European Union faces a "tall order" in settling its budget dispute, Tony Blair has said.
Earlier budget talks were inconclusive
Following an informal summit at Hampton Court, near London, he said countries were "in strong support" of plans to reduce regulations.
Leaders meet again in December, at the end of the UK's six-month EU presidency, to recommence formal discussions on a budget for 2007-13.
Talks collapsed in June amid rows over Britain's rebate and farm subsidies.
The European Parliament voted on Thursday to increase the budget by about four billion euros (nearly $5bn; £3bn) next year - despite demands from member states that it should be cut.
Speaking after the summit, UK prime minister Mr Blair said there was a "strong sense" that the EU had to get "back on track and moving in the right direction".
'Do it better'
He argued that leaders could not work on a budget until the EU "set a direction" for its future.
But European Commission President Jose Manuel Barroso said he was confident a budget deal could be reached in December. "I believe that Europe is on the move again," he said.
The BBC's European editor, Mark Mardell, said: "Tony Blair knows if he doesn't get a deal his presidency will be regarded a failure."
Mr Blair told a press conference there were differences of emphasis, but that most countries believed "Europe sometimes needs to do more and sometimes needs to do less, but in each case needs to do it better".
EU leaders had agreed to draw up plans of action to improve the continent's performance on issues such as university reform, working parents' rights and the creation of a common European energy grid, he added.
There was also a "strong desire" to take more co-ordinated action against illegal migration, while recognising the benefits of lawful migration to Europe.
Mr Blair said there was agreement on the need for more concerted action against terrorism.
These will be drawn up in time for the formal summit in December, in the hope of reaching final conclusions at a summit chaired by Austria next March.
Proposals are to be brought forward for a Globalisation Fund to help workers who lose their jobs when factories are moved abroad, Mr Blair said.
He added: "This is not to prevent companies being able to lay off their workers, but to ensure that where that does happen as a result of globalisation, we are able to give people support."
The budget for 2007-13 was "the crucial thing that we have to get right", said Mr Blair.
He added: "In my view, it will be a lot easier to get it right with a clear direction and priorities so that the budget is part of putting Europe on the right track, and not separate from it."
He acknowledged that there were differences over the EU's priorities between the 25 heads of state and government at Hampton Court.