The award served as a reminder that the EU had largely brought peace to a continent which tore itself apart in two world wars in which tens of millions died.

The EU has transformed most of Europe "from a continent of wars to a continent of peace," Nobel Committee chairman Thorbjoern Jagland said in announcing the award in Oslo.

"The EU is currently undergoing grave economic difficulties and considerable social unrest. The Norwegian Nobel Committee wishes to focus on what it sees as the EU's most important result: the successful struggle for peace and reconciliation and for democracy and human rights," he said.

Jaglund praised the EU for rebuilding Europe after World War Two and for its role in spreading stability after the fall of the Berlin Wall in 1989.

The debt crisis afflicting the single currency zone has brought economic instability to several member states, and rioting has erupted on the streets of Athens and Madrid as austerity measures have bitten hard.

The prize, worth $1.2 million, will be presented in Oslo on December 10. The decision by the five-member panel, led by Jagland who is also Secretary-General of the Council of Europe, was unanimous.