European Union chief Jose Manuel Barroso has accused Britain of "scaremongering" about levels of migration.
The attack came as George Osborne warned the UK could leave the EU and press ahead with a smaller group of liked-minded countries unless there were major reforms.
The Chancellor said the treaties underpinning the European Union were no longer "fit for purpose" and were dragging down its members' economies.
He warned that Britain should not be forced into a position where it had to "choose between joining the euro—which the UK will not do—and leaving the European Union."
Mr Barroso, the president of the European Commission, hit out at countries such as Britain trying to put a limit on migrants from the EU.
Under Brussels' rules, citizens of member states have the right to "free movement" in other EU countries.