The Nobel Peace Prize was Friday awarded to the European Union, an institution wracked by the euro crisis but credited with bringing more than half a century of peace to a continent ripped apart by two world wars.

"The union and its forerunners have for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe," Nobel Committee president Thorbjoern Jagland said in Oslo.

Reactions to the prize, which caught many by surprise at a time when the union of 27 states is in the throes of a severe financial crisis, were divided.

For the men of the hour, European Union President Herman Van Rompuy and European Commission President Jose Manuel Barroso, the award was "a tremendous honour".

"This prize is the strongest possible recognition of the deep political motives behind our Union: the unique effort by ever more European states to overcome war and divisions and to jointly shape a continent of peace and prosperity," they said in a statement.

The prize, they said, belonged to "all the 500 million citizens living in our union".

However, the Twittersphere was alive with sharp reactions to the pick at a time when European solidarity is facing its most daunting challenge in decades amid deep rifts between a south drowning in debt and a wealthier north only reluctantly coming to the rescue.

"Anti-austerity protests in Portugal, Spain, Greece, Italy & France, Nationalism, Fascism, unemployment and poverty. Yeah EU deserves it!" @AnonOpGreece said on Twitter.

Poland's Lech Walesa, who won the 1983 Nobel Peace Prize for leading the country's anti-communist movement, said he was "unpleasantly surprised" by the choice, and British eurosceptics also reacted with dismay.

"This goes to show that the Norwegians really do have a sense of humour," said Nigel Farage, the head of the UK Independence Party, who wants a referendum on Britain leaving the EU.

And Czech President Vaclav Klaus called the prize a "tragic mistake".

"I really thought it was a hoax, a joke. I couldn't imagine even in a dream that someone could be serious about it," added Klaus.

Jagland acknowledged that "the EU is currently undergoing grave economic difficulties and considerable social unrest".

But he stressed that the Nobel jury had wanted "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".

The creation of the union is credited with helping to bring peace and stability to a war-torn continent by bringing together former arch-foes France and Germany and herding them down the same path.

Despite recurring difficulties, the EU has become the biggest common market in the world, allowing for the free circulation of goods, people, services and capital.

Over the years, the pioneering project has swelled to encompass 27 countries which not long ago sat on both sides of the Cold War "Iron Curtain".

Following intense integration efforts, 17 of them now share a common currency, albeit under severe stress for some.

German Chancellor Angela Merkel, who faces harsh criticism from southern Europe for fronting the push for punishing austerity measures, hailed the EU's win and insisted efforts to save the euro were also aimed at ensuring peace on the continent.

"The euro is more than a currency because at the end of the day it is about the original idea of a union of peace and of values," she told reporters.

US Secretary of State Hillary Clinton said the prize reflected the bloc's hard work in striving for unity.

"Certainly it's quite remarkable to see how unified and peaceful Europe is in the 21st century and that did not happen by coincidence," Clinton said.

UN chief Ban Ki-moon praised the EU as "an engine of integration" that had achieved peace within Europe's borders built on dialogue and the rule of the law, creating "a model to be emulated the world over".

"Its unifying potential is all the more important in today's economic climate," he said.

Alongside the congratulations however, there were also calls for the EU to live up to its responsibilities as the bloc struggles with soaring unemployment and slumping economies, factors which contributed to sparking past conflicts.

Britain's Foreign Office urged the EU to make further progress, calling on it to "always strive to preserve and strengthen" its peace and reconciliation efforts.

French President Francois Hollande called the prize "a great honour" but also spoke of "responsibilities before us", including the challenge of offering growth, progress, jobs and solidarity.

This year's prize comes as a shock in host country Norway, which itself has rejected joining the union twice, in 1972 and 1994, and where three quarters of the population say they are opposed to membership, according to recent polls.

The nod to the EU this year can be seen as an effort by the Nobel Committee to rectify a historic oversight: after Gandhi, who died without receiving the honour, many experts agree the European project had been the most noticeable hole in the Nobel family tree.

It remains unclear who will collect the award.

The prize, consisting of a gold medal, a Nobel diploma and 8.0 million Swedish kronor ($1.2 million, 921,000 euros), will be handed over at a ceremony in Oslo on December 10.