Mr Jose Manuel Barroso has withdrawn his European Commission team barely an hour before its scheduled investiture vote in the European Parliament.
"I have come to the conclusion that if the vote is taken today, the outcome will not be positive for EU institutions or for the European project," he told a packed house. "In these circumstances, I have decided not to submit the new European Commission for your approval today."
He said he would consult EU leaders and parliament before putting forward new proposals "in the next few weeks".
Mr Barroso faced a defeat after he refused to replace controversial Italian nominee Mr Rocco Buttiglione, whose conservative Roman Catholic views on homosexuality and marriage offended many lawmakers. Earlier, Mr Barroso asked for, and was granted, a delay in today's vote to ratify the 24-member executive.
"We are saying there will not be a vote today," said Mr Johannes Swoboda, the Austrian vice-president of the Socialist group which spearheaded the campaign to block Mr Buttiglone. "There will be another proposal [leading to] a new commission with changes," he said.
Socialist officials estimated 362 MEPs would have voted against the commission, compared to 345 in favour.
A negative vote would have thrown the European Union into institutional turmoil after many MEPs took exception to Mr Buttiglone's publicly expressed view that homosexuality is a sin and that married women should rear children rather than work.
Two days of political manoeuvring in Strasbourg failed to break the deadlock between the MEPs as Mr Barroso insisted that he would not move the Italian - who has had private audiences with the Pope - to a position less sensitive than justice and home affairs.
Despite assurances that civil rights, anti-racism and anti-discrimination issues would top his presidency agenda, Mr Barroso was unable to convince enough MEPs that Mr Buttiglione was fit to take charge of policy areas such as civil liberties and fundamental rights.
The delay means the outgoing Commission led by Mr Romano Prodi of Italy remains in office temporarily, but officials said it should not seriously affect EU decision-making. Mr Prodi told Italian television he was confident parliament would approve a new Commission at its next session on November 17th, but Mr Barroso would have to make more than one change to his team.
Outgoing Commission Vice-President Mr Neil Kinnock said he expected Mr Buttiglione, a confidante of Pope John Paul, to resign. But he did not, and Italian Foreign Minister Franco Frattini said Mr Buttiglione remained Rome's nominee "at present".
Agencies
When asked whether Italy would consider changing its candidate, who has been rejected by a European Parliament committee, Mr Frattini said: "This is a debate that will be subject to future reflection between the Commission president and European heads of state. We certainly can't do it now."