UK Prime Minister Tony Blair has announced a full-scale review of whether Europe's welfare system is fit for the modern world.
Mr Blair met Mr Barroso and other EU commissioners in London
Speaking as the UK took over the EU presidency, Mr Blair said Europe's "social model" would be discussed at an informal summit in Britain this autumn.
He said there were risks to the plan but the issue was at the centre of debate about the EU's future direction.
Mr Blair and other UK ministers met the whole European Commission in London.
At a news conference with commission president Jose Manuel Barroso, he said EU enlargement, reducing regulation and strengthening EU borders would be discussed during the UK's six-month presidency.
The UK is also chairing the G8 and Mr Blair said he was setting aside time at next week's summit to discuss a new initiative on achieving Middle East peace.
Talks on fixing the EU budget for 2007-13 collapsed two weeks ago with Mr Blair insisting he would only negotiate the UK's annual rebate if European farm subsidies were reformed.
France and other countries say a deal fixing the Common Agricultural Policy until 2013 cannot be changed.
The prime minister said budget talks would be a major part of the UK presidency but he did not know whether an agreement would be possible.
Mr Barroso said leaders should nurture a "culture of compromise" rather than treat EU talks like a boxing match.
"We are a union of 25, very soon we hope 27, which is diverse and nobody is going to impose its own point of view to the others," he said.
"To reach an agreement everyone will have to contribute."
BBC Europe correspondent Chris Morris said Mr Blair had thrown down the gauntlet by debating the European "social model".
The talks will centre around a paper produced by the European Commission about the sustainability of the budget.
Mr Blair last month stressed he did not want to ditch social protection in favour of an Anglo-Saxon economic model which trampled on the poor.
On Friday, he said Europe should have a "strong social dimension".
"Europe is not just about free trade and it is not just about the economy," he said.
"But it is no use us trying to compete in the tough, changing world unless we are prepared to make the changes necessary, including not abandoning our social model, but updating it and modernising it."
The UK is resisting European Commission calls for an end to its opt out from rules limiting the working week to 48 hours.
British Foreign Secretary Jack Straw said public faith in the EU was undermined by "gratuitous interference" from Brussels in issues which should be left to nation states.
Back of an envelope?
The Conservatives are sceptical the government will deliver on its words.
Shadow Europe minister Graham Brady said: "Their agenda is to increase Britain's contributions to the EU budget and the talk about radical reform to the Common Agricultural Policy really is just that.
"The document they published yesterday (Thursday) setting out the government's priorities does not mention that radical reform at all. It's all back of an envelope stuff."
Liberal Democrat foreign affairs spokesman Nick Clegg said the UK presidency faced three tests: CAP reform; maintaining momentum on EU enlargement, amid disputes about whether Turkey should join; and delivering economic reform.