Prime Minister Tony Blair has clashed with UK Independence Party (UKIP) members of the European Parliament, telling them: "This is 2005, not 1945."
Defending the EU budget deal, which cut the UK's rebate, he said: "We are not fighting each other any more."
UKIP's Nigel Farage said Mr Blair was "outplayed and outclassed" by France's Jacques Chirac in budget negotiations.
But Mr Blair said the deal between the EU's 25 member states had been the best possible "in the circumstances".
In heated exchanges, he said that although Mr Farage and colleagues "sit with our country's flag, you do not represent our country's interest".
Mr Farage, whose party wants the UK to quit the European Union, said negotiations had been "game, set and match to President Chirac", adding that Mr Blair had "been outclassed and outplayed at every turn".
"We are isolated and alone in the European Union. We are completely alone," said Mr Farage, whose party got 16.1% of the vote in the last European Parliament elections.
The comments come as the UK ends its six-month EU presidency.
Last weekend Mr Blair brokered an agreement between member states for the EU's next seven-year budget.
It will see £1bn a year cut from the UK's rebate.
Mr Blair said there were "people who say it [the overall budget] should be lower, there are people who say it should be higher but I think, and we thought as the heads of government, that it represented a fair settlement for the present time".
He added that "without it, there wouldn't be the certainty for countries - particularly these new accession countries - to plan ahead for the future".
'Top to bottom'
Members of the European Parliament will have to give their approval to the deal next year, and they have already demanded a much bigger budget.
The agreement, reached in Brussels early on Saturday, includes an EU commitment to review farm spending in 2008.
Mr Blair told MEPs this would involve a "debate from top to bottom on the European budget", including the Common Agricultural Policy and the UK rebate.
He said of the EU: "It was like a house that had many different rooms, constructed in different eras by different designers.
"The result is a building, but not one that really quite meets the needs of the modern world."
Mr Blair has been criticised in the UK for giving up part of the country's rebate without reform of agricultural spending.
Shadow foreign secretary William Hague said: "Tony Blair's presidency will be remembered as the time Britain gave up £7bn without securing anything in return."
Liberal Democrat leader Charles Kennedy said: "If only Tony Blair could close the gap between his rhetoric and his actions in Europe, he'd be in a much stronger position both in the EU and at home. He has mismanaged expectations."
European Commission chief Jose Manual Barroso has suggested setting an EU tax for citizens of member states.
When asked about this, Mr Blair said he already had "enough on my plate" without arguing for such a change.