The award honored the struggle in Europe to not only hold the union together in the wake of the debt crisis, but also to deepen integration across a vast swath of the region stretching from the isles of Greece to the Scottish Highlands, from the ports of Portugal to northern Finland.
But the choice, announced to audible gasps from a room of journalists in Oslo, comes as the E.U. has come under international fire for its bureaucratic and plodding handling of the crisis, as well as for foisting onto its heavily indebted members a crushing austerity that has crippled domestic economies and sparked social unrest in nations such as Greece and Spain.
It fed into complaints that the Nobel committee increasingly has strayed from the award's original ideals -- including when it honored President Barack Obama in 2009, just months after he took office -- and prompted some critics to say the prize is venturing deeper into the realm of political theater.
"Twenty years ago this prize would have been sycophantic, but maybe more justified. Today it is downright out of touch," said Martin Callanan, a Conservative British politician and chairman of the European Conservative and Reformists Party in the European Parliament. "The E.U.'s policies have exacerbated the fallout of the financial crisis and led to social unrest that we haven't seen for a generation."
The Nobel committee said it wanted to laud the E.U. for safeguarding peace and security and forging a common future for a continent saddled with a dark history of conflict, even as the union confronts its toughest test.
"The E.U. is currently undergoing grave economic difficulties and considerable social unrest," Thorbjoern Jagland, the Nobel Committee chairman, said in Oslo. "The Norwegian Nobel Committee wishes to focus on what it sees as the E.U.'s most important result, the successful struggle for peace and reconciliation and for democracy and human rights. The stabilizing part played by the E.U. has helped to transform most of Europe from a continent of war to a continent of peace."
José Manuel Barroso, president of the European Commission, the executive branch of the European Union, said the award shows that "even in tense, difficult times, the European Union remains an inspiration for countries and people all over the world."
"This is indeed a great honor for the 500 million citizens of Europe," Barroso said.
But if the union has instilled democracy and peace in Europe, it has also sowed fresh resentment in recent years. As borders have been erased around the region and trade has flowed freely, anxiety has grown in some countries over unfettered immigration as well as the economic dominance of the region by the E.U.'s core nations, Germany and France.
Nationalist parties are on the rise in Finland, France, Greece and Italy. Germany has been criticized for being reluctant to extend its largesse to threatened European countries such as Greece and Spain.
The award also comes amid a widening gulf between the 17 E.U. nations that share the euro and the 10 nations still outside the common currency, with talk growing of a two-tiered body in which some nations would forge more closely together while others drift apart.
Anti-E.U. sentiment is on the rise in nations like Britain, which has jealously guarded the British pound. Pressure is building for the Conservative-led government of Prime Minister David Cameron to hold a national referendum on whether to exit the union.
The move to award the prize to a vast and varied organization follows a pattern in recent years of the Nobel committee thinking outside of the box -- the International Atomic Energy Agency won in 2005; and the Intergovernmental Panel on Climate Change shared the honor with Al Gore in 2007. The choice also amounted to a controversial pick for the Norway-based Nobel committee, given that voters in that country have twice rejected membership in the E.U.
Critics of the decision to honor the E.U. -- including many, such as Britain's Callanan, who are deeply skeptical of the Union and its mission -- noted that the European Union has not been alone in heading off conflicts on the continent. As recently as the 1990s, it required the aid of the United States to settle the Balkans dispute on its own frontier.
"Until the end of the Cold War, it was NATO more than anyone else that kept the peace," Former British foreign secretary Malcolm Rifkind said in a statement. "If they want to give the prize for preserving the peace in Europe, they should divide it between NATO and the E.U."
But in Germany, where opinion polls show that a majority of citizens are still committed to Europe unity even as they tire of supporting their struggling neighbors, news of the prize was greeted with wide appreciation. Even the website of the Bild tabloid -- normally a haven for militantly anti-euro headlines -- proudly proclaimed the news, with the E.U.'s blue and yellow logo displayed in a lineup of past winners including Martin Luther King Jr. and Mother Teresa.
"We see this as a confirmation, an encouragement for the great project of peace that this European Union has spread across the European continent," said Steffen Seibert, a spokesman for German Chancellor Angela Merkel.
French President Francois Hollande hailed the award as an "immense honor" that "commits us all to continue toward a Europe more united, more just, stronger and more capable of peacemaking."
"Through this distinction, every European can feel a sense of pride, that of being a member of a union that was capable of making peace among peoples that had for a long time clashed with one another, and of building a community founded on the values of democracy, liberty and solidarity," Hollande, who was traveling in Africa, said in a statement.
But Marine Le Pen, who leads France's extreme nationalist National Front party, said that honoring the E. U. "demonstrates great cynicism toward the millions of Europeans who are suffering mortally" because of the debt crisis.
The European Union was born from the ashes of World War II, with leaders seeking to bind their countries so tightly together that they would never again face each other in war.
In 1950, France and Germany launched discussions of how to commonly run their coal and steel industries, and other countries soon joined in the effort. The aim was to boost each country's economy and ensure that the heavy industries could not turn to manufacturing weaponry that neighbor could use against neighbor.
By 1957, the agreements had evolved into a common market, with few trade barriers among the Western European countries that joined in.
In 1993, the market became the European Union; six years later, the common euro currency was introduced.
But many leaders still hold firm to the idea that common solidarity in the name of peace is the overarching goal.
Germany, long Europe's most powerful economy, found salvation in the decades after World War II by throwing itself into pacifistic European ideals. And at the time of German reunification in 1990, its willingness to commit to a common currency eased France's anxiety about having an even more powerful nation on its eastern border.
German leaders still speak in idealistic terms about the power of a unified Europe. Merkel has in recent months floated plans to give over extensive sovereignty on economic decisions to the European Union, sharing Germany's wealth so long as other nations agree to strict rules about how they run their budgets.
Over the years, the European Union has expanded, piece by piece, to encompass most of the continent. Portugal, Spain and Greece joined in the 1980s, shortly after their experiences with dictatorship. In 2004, many former Eastern Bloc countries gained entrance. Now, Balkan countries that just over a decade ago were warring with each other are slowly making their way into the union. Croatia plans to join next year.
For the new countries, membership confers status, economic support and a path toward euro membership. Many smaller nations still feel that the benefits of the common currency outweigh the drawbacks. Those that were once underneath the thumb of the Soviet Union appreciate having a backer against modern-day Russia, of whom many are still suspicious.
"Deeply touched honored that the E.U. has won the Nobel Peace Prize," the head of the European Parliament, German Socialist Martin Schulz, posted on Twitter moments after the award was announced. "Reconciliation is what the E.U. is about. It can serve as inspiration."
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Birnbaum reported from Berlin. Washington Post staff writer Edward Cody contributed to this report from Paris.
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