EU presidents: 'We're not dismantling the welfare state'

"We want to make sure that our economies are competitive enough to create jobs and to sustain the welfare of all our citizens and that's what our work is about."

European Commission President Barroso, who was delivering a report back from an EU summit at the end of March dedicated to delivering a ‘comprehensive response' to the crisis, also said that his institution had tried to push for a more social response but laid the blame at the the foot of the member states for blocking proposals from the EU executive.

"The commission did fight hard to have more emphasis on social aspects and education [in the Europe 2020 strategy, its ten-year plan for growth]," he said, adding that a Europeanisation of public debt has long been a goal, saying "eurobonds were proposed 30 years ago."

On making banks pay their share of the burden, he said: "I defended the financial transaction tax in the G20 ... [but] this was rejected by a huge number of our G20 partners. Now we are discussing it at the European level."

"Let's be honest once again. Several member states are fundamentally opposed to it. They will not agree."

He also said that it was the commission that has pushed for lower interest rates to be paid on the Greek and Irish bail-outs.

"I am proud of the fact that the commission and myself have supported the idea to reduce the interest rate which is being paid by Greece and we are now doing the same for Ireland because this is fair."

"We cannot impose costs which are very difficult for Greek or Irish citizens to pay."

He did however concede that he is worried that Europe is splitting between the haves and have-not states.

He said he wants "to avoid a Europe divided on north-south or centre-periphery lines."

He was responding in particular to criticisms from the centre and left of the house.

During the debate, Socialist leader Martin Schulz attacked Barroso for the bloc's failure to make public investments at the same time as pushing for cuts to public spending.

He also accused Barroso's political party, the centre-right Portuguese Social Democrats, of "bringing down the government for implementing the policies that you and the Commission demanded." 

On Tuesday, credit rating agency Moody's downgraded Portugal's debt while Portuguese bankers are also demanding the country's caretaker government request an interim loan from the EU until after the general election.

Political analysts have said that the caretaker government does not have the mandate to request a bail-out and negotiate the attendant package of austerity measures that come tied to such a lifeline.