David Cameron admitted EU reform would be a "long, tough fight" after arch-federalist Jean-Claude Juncker was chosen as president of the European Commission - but insisted he would not give up the cause.
The Prime Minister - who along with Hungary was defeated in his attempt to block Mr Juncker's candidacy - said his fellow EU leaders had made a "serious mistake".
"This is a bad day for Europe. It risks undermining the position of national governments, it risks undermining the power of national parliaments and it hands new power to the European Parliament," he said.
Mr Cameron had argued Mr Juncker would block reform of the EU, but the vote has not dented the Prime Minister's commitment to that cause.
The PM argued Mr Juncker was not the "right person" for the post "This is going to be a long, tough fight and frankly sometimes you have to be prepared to lose a battle in order to win a war," he added. "It has only stiffened my resolve to fight for reform in the EU, because it is crying out for it."
The Tories have promised a referendum on EU membership should they win the next election - and Health Secretary Jeremy Hunt believes "cowardice" from Europe's leaders can only make a vote to quit more likely.
"As a result of cowardice yesterday from other European leaders who weren't prepared to say in public what they said in private, they're going to have to try very hard to persuade the British people that Europe has a reform agenda," he said.
Mr Hunt claimed the British people would be "proud" of the Prime Minister - and that his position would ultimately help the UK renegotiate its relationship with Europe.
"You're getting European leaders queuing up to say how much they want Britain to stay in the EU, how they'll make compromises.
"We want to be a country in control of our own destiny, we want to stop abuses of the welfare system and NHS.
"We're not going to take part in some grubby face-saving deal where we pretend we've got a deal - a feature of the last government. We want substantive reform in Europe."
Former Luxembourg premier Mr Juncker was backed by Germany's Angela Merkel Mr Cameron claimed Britain had "made some small steps forward" during the vote discussions.
This included an agreement that ever-closer union allows for different paths of integration and respects the wishes of countries such as Britain that do not want a closer relationship.
German Chancellor Angela Merkel was an advocate of Mr Juncker, but amid the vote she urged EU colleagues to "compromise" with Britain.
"I think we can find compromises here and make a step towards Great Britain," she said.
Labour leader Ed Miliband commented: "On Europe, David Cameron has now become a toxic Prime Minister. He cannot stand up for Britain's national interest because when he supports something, he drives our allies away."
UKIP leader Nigel Farage said: "I think what's clear is that any cards that Mr Cameron may have had to play have been spent, and have been lost over a futile battle that he was bound to lose from the beginning.
"(Any) renegotiation now doesn't look very likely. He has been humiliated today but worse than that, he actually looks very isolated."
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