The European Union, facing its worst crisis in decades, pledged to put its house in order to maintain Europe at peace for the next generation as its leaders collected the bloc's contested Nobel peace award.

Europe's economic woes, its fiery protests, relentless job cuts and angry youths, provided the backdrop to the lavish Nobel awards ceremony in snowy Oslo attended by a score of EU heads of state and government, including historic Franco-German couple Angela Merkel and Francois Hollande.

"Peace must not be taken for granted," said Nobel Committee chairman Thorbjoern Jagland whose country ironically has stubbornly refused to join the EU.

It was France and Germany turning the page on three wars 60 years ago that set the stage for the EU to grow from six nations to 28 next year when Croatia becomes the latest Balkan nation to join the bloc, in a fresh signal of the European Union's contribution to peace.

Hollande and Merkel, though currently at odds over the EU's way forward out of the crisis, stood up together hands clasped amid a long ovation as speeches harked back repeatedly to the peace which has settled over the continent in the last decades.

But the Nobel Committee has been criticised for handing the prestigious award to the half-a-billion strong bloc in times of political division and social tension.

"The test Europe is currently facing is real," acknowledged EU president Herman Van Rompuy, one of three EU officials to pick up the Nobel medal, diploma and near million-euro prize.

"We will come out of this together, and stronger."

Rich nations of northern Europe and the struggling economies of the south have shown increasing divisions recently as austerity reforms trigger fiery protests and feed extremist movements such as those in Greece.

-- 'Europe needs to move forward' --

Half a dozen EU leaders, including Britain's premier David Cameron, snubbed the event, held just four days before a key EU summit determines the next steps to tighten the union in order to save the euro and redress the economy.

With euroscepticism on the rise in Britain, the EU is bristling with talk of a possible walk-out by Britain -- or "Brixit".

The leader of the increasingly popular eurosceptic UKIP party said this weekend that "far from bringing peace, the EU is engendering violence, poverty and despair".

And Britain's deputy premier Nick Clegg, who attended on behalf of the government, insisted in a statement that the "prize is a tribute to the people of Europe, not an institution".

Nobel Committee chairman Jagland agreed that "we are not gathered here today in the belief that the EU is perfect. "Europe needs to move forward, safeguard what has been gained, and improve what has been created."

"This is the only way to solve the problems created by the financial crisis, to everyone's benefit."

Barroso, who runs the EU's day-to-day business, stressed in a speech touching on the fall of dictatorships in Greece, Spain and Portugal in the 1970s as well as the 1989 fall of the Berlin Wall, that the bloc suffered from "imperfections" but would do better.

"Our quest for European unity is not a perfect work of art, it is work in progress that demands constant and diligent tending."

Van Rompuy pledged "to leave a better Europe for the children of today and those of tomorrow".

But tensions remain between the 17 nations that share the euro and those that have kept their own currencies, while differences between France and Germany are notably holding up a deal to set up a banking union seen as a key to the future of the eurozone.

Efforts last month to agree a new multi-year budget collapsed in an ugly showdown between have- and have-not nations of north, south and east, and the bloc also split over its stand on the Palestinian bid for a status upgrade at the UN.

Meanwhile, unemployment has surged to one in four workers in Greece and a massive one in two under-25s in Spain, whipping up talk of a "lost generation" in Europe.

"The Nobel committee picked their time carefully, when the EU was in crisis and nationalism on the rise," Jan Techau, director of the Carnegie Europe think tank, told AFP.

"This is a reminder to us. The EU is a key guarantor of peace but we hold this in disregard, we tend to forget."

Nobel prizes for literature, chemistry, physics, medicine and economics were also handed out Monday in Stockholm.