Mr Miliband warned Labour MPs against defeatism
Foreign Secretary David Miliband has attacked Conservative policy on Europe as a "national embarrassment".
He said he did not want people laughing at Britain because "a bunch of school boys have taken over the government".
Addressing delegates on the last day of the Labour conference, he accused Tory leader David Cameron of "pandering" to "Euro extremists in his own party".
But William Hague attacked the "smears" and said Mr Miliband had failed in his duty to promote Britain's interest.
The Tories have left the main centre right group in the European Parliament to form a new "anti-federalist" bloc in the European Parliament.
Attacking the party's new allies in the European Conservatives and Reformists Group - which includes more than 50 MEPs from across eight member states - Mr Miliband said they were "a collection of outcasts".
Repeating Labour's claims that they included a Latvian party which celebrates the "Latvian Waffen SS with a march past of SS veterans", he attacked Tory chairman Eric Pickles who, he said, had told the BBC they should not be condemned because "they were only following orders".
"It makes me sick," said Mr Miliband.
In an interview last week Mr Pickles accused the Lib Dems of recycling "old Soviet smears against the Latvians" and said the marches were not commemorating the Nazis but all Latvians who had died in wars including the conscripts who died during the Second World War.
Mr Miliband continued: "David Cameron has shown not leadership but pandering, not judgement but dogma, not patriotic defence of national interest but the white flag of surrender to euro-extremists in his own party."
He added: "It's tempting to laugh at the Tory policy on Europe, but I don't want people laughing at my country because a bunch of schoolboys have taken over the government. The Tories are not a government in waiting, they are a national embarrassment, desperately trying to keep up with UKIP."
In response to the speech Mr Hague, shadow foreign secretary, said: "David Miliband's smears are disgraceful and represent a failure of his duty to promote Britain's interests as foreign secretary. He has failed to check his facts. He has just insulted the Latvian Government, most of whose member parties have attended the commemoration of Latvia's war dead."
He added: "Just because Latvia is a small country does not give the foreign secretary the right to put cheap party spin before the national interest.
"His accusation of anti-Semitism against Michal Kaminski is shameful and is based on remarks which the Chief Rabbi of Poland has said were misrepresented. This kind of shoddy politics should be beneath a foreign secretary.
"It is also indecent to allege that Eric Pickles, who has an admirable record campaigning against anti-Semitism and other forms of racism, was defending the Waffen SS. Mr Miliband should withdraw that suggestion."
In what was the penultimate speech of the Labour conference, Mr Miliband warned Labour MPs against defeatism despite the Conservatives' large lead in opinion polls.
He told delegates: "When members of the party, even members of Parliament, say nothing much has changed, that we could use a spell in opposition, tell them: Don't do the Tories' dirty work for them. If we don't defend the record, no-one will."