INTERVIEW-Proactive jobs policy vital for European recovery
* EU employment commissioner warns of "dangerous polarisation"
* Boosting jobs can support demand-led recovery - Andor
* Urges action on European banking union
* Brussels eyes steps to boost labour mobility
MOSCOW, July 18 (Reuters) - The European Union must create a path to work for young people to overcome an economic rift that has inflicted a slump and mass unemployment on its peripheral member states, its top employment official said.
Structural reforms are not enough, Employment Commissioner Laszlo Andor told Reuters in an interview on Thursday, saying investment in job creation was vital both to uphold social peace and drive economic recovery after years of austerity.
The indebted countries of the euro zone have been hardest hit by tough conditions attached to financial aid from the centre, forcing up youth unemployment rates in Spain and Greece to nearly 60 percent.
"There has been a very dynamic and dangerous polarisation inside the European Union," said Andor, who was in Moscow to attend meetings of labour and finance ministers from the Group of 20 economies.
Even though the United States was at the epicenter of the 2008 global financial crash, it is Europe that has struggled most to achieve a sustainable recovery and contain a rise in the jobless rate to 11 percent.
Of the four nations in the G20 with double-digit employment rates three are European - Spain, Italy and France. The other is South Africa.
Countries in the euro zone have sought to regain competitiveness through structural reforms, driving down wages and state spending, but these "internal devaluations" have choked off economic recovery.
"If in the name of competitiveness and internal devaluation you just compress wages constantly, you also kill demand and you can kill the recovery," Andor said.
"We are looking for a more of a demand-driven recovery."
Andor, 47, dismissed suggestions that high social spending was to blame for the poor performance on jobs and growth in Europe, which faces mounting calls from other members of the G20 - an intergovernmental forum - to do more for global growth.
"The countries with the highest social spending are the most competitive," he said. "The Nordic countries are today the champions of competitiveness, growth and social cohesion.
"Not everyone can be Sweden or Denmark - we know this very well - but this contradiction doesn't exist in my view."
European leaders agreed last month to spend 6 billion euros ($7.9 billion) over two years on measures to combat youth unemployment. The Youth Guarantee scheme would offer a job, training or apprenticeship within four months to those leaving school, full-time education or becoming unemployed.
Economists have criticised the measure, with a total cost of 20 billion euros, as too little. They say that Germany, where Chancellor Angela Merkel faces an election in September, has put the brakes on bolder action to avoid alienating voters.
Andor defended the Youth Guarantee project, saying it would provide near-term help to job seekers and also pay social and economic dividends over time.
"It ensures that social problems are limited in the short run," he said. "But it is also an investment because it ensures better employability for younger people in the longer term."
The Hungarian economist pressed calls for the EU to speed the creation of a banking union that could boost confidence to lend across national borders and reverse the capital outflows that have slashed investment in the euro-zone strugglers.
Looking to the next round of EU summits later in the year, Andor said the Commission aimed to deliver proposals on "the social dimension of monetary union" and on making it easier for people to migrate in search of work.
"In the short term at least you cannot promise a quick recovery in some of the depressed regions, while it's true that in quite a few other regions, such as the north, there is a shortage of labour," he said.
Yet matching people to jobs requires help because the European labour market - with its many languages and governments - "is not like the American".
"If you are well qualified but Spanish, it's not obvious that you can get a job in Germany," said Andor. "And it's not obvious that you are welcome." ($1 = 0.7637 euros)
(Editing by David Cowell)