British Prime Minister Tony Blair called the meeting at the historic Hampton Court palace to encourage brainstorming on the need for social and economic reform in the 25-nation bloc, free from the usual overloaded agenda with hundreds of aides.
But expectations are low, partly because lame-duck outgoing German and Polish leaders will be attending rather than the new conservatives about to take office, but also because there is little sign of Europe's ideological wounds healing.
French President Jacques Chirac, who clashed with Blair over the budget, is demanding greater protection for French workers, resisting EU concessions on agriculture in global trade talks and refusing to consider shifting European resources away from farm subsidies and towards innovation before 2013.
A senior EU diplomat said the prime aim was for leaders to mend fences after the acrimonious June summit and find a way forward after the French and Dutch referendums rejecting the EU constitution and heated debate over plans to open the European services sector to cross-border competition.
"Once you have slammed the door, it is always difficult to get back in," he said, adding that personal chemistry often plays a larger role than substance at such informal gatherings.
In pre-summit comments, Blair has depicted the meeting as an essential prelude to seeking a compromise on the 2007-2013 EU budget, which he hopes to broker in December having blocked a deal in June by demanding cuts in farm subsidies, which mainly benefit France, in return for capping Britain's budget rebate.
"What is important is the financing deal is seen as part of a bigger picture, where we are trying to move Europe forward in the direction of reform and change ... to modernise its economy because we face enormous competitive challenges, from China, from India, from America, from Japan," he said on Monday.
British leaders insist the EU must change its labour market and welfare policies to create jobs for the bloc's 19 million unemployed and prepare to cope with an ageing population.
Many of the 25 member states are frustrated at what they see as the slow pace of Britain's six-month EU presidency and want London to put forward budget compromise proposals now.
A European Commission study prepared for the summit says Europe's high level of social protection can only be sustained if EU countries implement reforms to increase incentives to work, learn new skills and stay in work until later in life.
Blair wants leaders to agree that Commission President Jose Manuel Barroso's paper sets a basic direction for adapting the European social model to cope with globalisation.