Party to say that 'political priorities' of European parliament president, Martin Schulz, clash with its vision for Europe

The Labour party will on Saturday set itself definitively against the federalist vision of Europe when it refuses to endorse the European parliament president Martin Schulz as the Socialists' candidate to be the next European commission president.

In a clear signal to its European partners on the left that there are limits to Labour's support for the EU, the party will say that the German's "political priorities" clash with its vision for Europe.

Ed Miliband and the shadow foreign secretary, Douglas Alexander, have decided to speak out against Schulz on the eve of his formal designation at a Party of European Socialists (PES) conference in Rome as the left's candidate for EC president.

Labour, which had hoped to press the case of the centre ground Danish prime minister, Helle Thorning-Schmidt, who is married to Lord Kinnock's son Stephen, cannot block Schulz because he is the PES's only candidate.

But Alexander and Miliband are making clear that they do not share the vision of Schulz who is seen by Labour as an arch federalist and fiscally irresponsible. He argued strongly against a cut in the next EU budget, whereas Labour campaigned strongly for a real-terms budget cut and tabled a commons vote long before David Cameron secured a cut during EU negotiations.

A Labour spokesperson said: "The Labour party will not be endorsing Martin Schulz as the candidate for the next president of the European Commission. Martin Schulz's political priorities in Europe do not represent those of the Labour party. While not being able to support the PES common candidate for this year's election, we continue to support the principle of having common candidates."

The main EU political groupings are nominating candidates for the post of EC president, which falls vacant this autumn, because the Lisbon treaty instructs EU leaders to take account of the results of the European parliamentary elections in May when they choose a candidate. José Manuel Barroso, the former Portuguese prime minister, will stand down later this year after five years in the post.

Jean-Claude Juncker, the federalist former prime minister of Luxembourg, is seen as the frontrunner to be the candidate of the centre right European People's party (EPP) after he won the support of Angela Merkel's CDU party in Germany. The EPP will choose its candidate at a conference in Dublin next weekend.

Labour's decision to reject Schulz is designed to show the party believes strongly in co-operation within the EU but has no truck with federalists who want to embrace even greater integration. Schulz is a famous federalist who shot to prominence in 2003 when Silvio Berlusconi, the then Italian prime minister, said he should take a film role as a Nazi concentration camp leader.

The rejection of Schulz comes as Labour feels increasingly confident about its decision to dismiss a referendum on Britain's EU membership on the timetable proposed by Cameron – by the end of 2017 following negotiations that have yet to be launched.

Alexander said after talks between Miliband and Merkel during her visit to London on Thursday that the gap between what the German chancellor can offer and the demands of Tory backbenchers was as wide as ever.

Labour is also objecting to Schulz after he opposed the cut in the EU budget. Schulz said last November: "The European parliament would have preferred a much more ambitious MFF [EU budget from 2014-2020] targeted more towards the key challenges facing the EU today. A more ambitious MFF would have seen higher amounts available in the EU budgets and would have boosted a job-rich recovery."