David Cameron's failure to block the appointment of Jean-Claude Juncker to the European Union's top job shows he poses a "real and present danger" to the British economy, Ed Miliband has claimed.
The Labour leader said the "debacle" over the arch-federalist's nomination had taken the UK closer to the "exit door" that could put three million jobs and tens of thousands of businesses at risk.
Health Secretary Jeremy Hunt accused EU leaders of "cowardice" for backing the former Luxembourg premier as the next president of the European Commission and insisted British voters would be "proud" of the Prime Minister.
But, writing for the Sunday Times, Miliband claimed that Cameron had demonstrated that he "is incapable of reforming Europe".
"The lesson of the Juncker debacle is that David Cameron and the Conservative Party now pose a real and present danger to our economy," he wrote.
"He could not build alliances and his threats succeeded only in turning a Europe that was divided over the best candidate for commission president into a Europe united against him.
"There can be no better indicator of how a Conservative government would damage Britain's national interest and Britain's businesses if it were to win a second term next year.
"Cameron blusters about bullying 27 other member states into agreeing fundamental treaty change before a referendum on withdrawal.
"But the isolation he achieved this week is not 'splendid'. It shows he is incapable of reforming Europe and his strategy of getting change by making threats to leave to get change does not work.
"All it does is take Britain closer to an exit door through which three million British jobs and tens of thousands of businesses could disappear."
Shadow chancellor Ed Balls branded the week's events a "catastrophe for Britain and the British national interest", adding: "I've never seen a negotiation so cack-handed."
He told BBC One's The Andrew Marr Show: "We won't be influential in the world, unless we are influential in Europe."
He said: "What is David Cameron's European policy? Does he think we should be in Europe, I do. I think that we will only be influential in the world if we are influential in Europe. Does he want reform? He says he does but he can't tell us what his reforms are.
"He's set an arbitrary timetable for a referendum which everybody knows is deeply destabilising and why has he done that, because his European policy is not being decided by the national interest, Britain's future, jobs and investment, but by what Tory backbenchers are demanding.
"He's weak, he's lost control, he's on the back foot, Britain is suffering. I think it's catastrophic for Britain."
Labour, he said, "is absolutely united", adding: "We want to stay in Europe, but we want reform. Tough reforms, reforms to immigration rules, reforms to the CAP, to the budget."
Balls said: "The right thing for us to do is to argue for reforms, but we've got to be listened to and we're not being listened to at the moment."
Miliband's tirade comes as CBI director general John Cridland said the country's economic success depended on it remaining a full member of the EU.
He told The Observer: "The EU is our biggest export market and remains fundamental to our economic future. Our membership supports jobs, drives growth and boosts our international competitiveness."
He dismissed the idea that Britain could be just as successful outside the EU with some form of associate membership status, a suggestion favoured by some Conservatives.
He said: "Alternatives to full membership of the EU simply wouldn't work, leaving us beholden to its rules without being able to influence them. We will continue to press the case for the UK remaining in a reformed European Union."
But Hunt defended the prime minister's campaign, and attacked EU premiers for saying they would oppose the arch-federalist's nomination in private only to then support him publicly.
He said: "As a result of cowardice yesterday from other leaders who weren't prepared to stand up in public and say the things they had said in private, they're going to have to work a lot harder to persuade the British people that Europe can be trusted with a proper reform agenda that's going to make it strong and competitive in a very tough global economy."
After the defeat Cameron conceded that he faces a tougher fight to persuade Britons to vote to remain in the EU.
But Nigel Farage said the drubbing showed Cameron would not be able to renegotiate Britain's relationship with Brussels and claimed EU leaders would rather see the UK leave than thrash out a substantial new deal.
He told BBC Radio 4's Today programme: "In terms of the fundamental changes that the British people really want in this relationship, namely we want a trade deal and not membership of a political union, I would say this to you: the other European leaders and certainly the European Parliament would rather the United Kingdom left the EU than start to pick apart the treaties because if they do that they know there'll be half a dozen other northern European countries that will demand the same."
Sweden's prime minister Fredrik Reinfeldt said he was willing to "walk the extra mile" to address British concerns over the EU.
He said the strategic agenda agreement took into account UK concerns over an ever closer union.
"Just look into what we have written in our conclusions," he told Today.
"You will find references with text, which I think is very important for David Cameron, saying this ever-closer union perception is maybe not the best for everyone."