* EU has committed 700 billion euros for banks, economies
* Little done to tackle social fallout from the crisis
* Greece, Spain, Portugal facing crippling unemployment
* Leaders must get a grip on social implosion
By Luke Baker
BRUSSELS, March 11 (Reuters) - Europe has spent hundreds of billions of euros rescuing its banks but may have lost an entire generation of young people in the process, the president of the European Parliament said.
Since the region's debt crisis erupted in Greece in late 2009, the European Union has created complex rescue mechanisms to prop up distressed countries and their shaky banking sectors, setting aside a total of 700 billion euros.
But little has been done to tackle the devastating social impact of the crisis, with more than 26 million people unemployed across the EU, including one in every two young people in Greece, Spain and parts of Italy and Portugal.
That crippling level of unemployment has led to protests and outbreaks of violence across southern Europe, raising the threat of full-scale social breakdown, including rising crime and anti-immigrant attacks that can further rattle unstable governments.
"We saved the banks but are running the risk of losing a generation," said Martin Schulz, a German socialist who has led the European Parliament, the EU's only directly elected institution, since January last year.
"One of the biggest threats to the European Union is that people entirely lose their confidence in the capacity of the EU to solve their problems. And if the younger generation is losing trust, then in my eyes the European Union is in real danger," he told Reuters in an interview.
Figures released last week showed 57 percent of Greeks aged 15 to 24 are out of work, and a similar scourge is tearing apart the fabric of Spain, where some university graduates in their 30s have never had a job. ( link.reuters.com/dab48s )
European Union heads of state and government will discuss the fallout from the debt crisis at a summit on March 14-15.
There are plans for a "youth employment guarantee", which would ensure that people under 25 receive either an offer of work, further education or work-related training at least four months after leaving education or being employed.
That is part of a 6-billion-euro initiative to tackle youth unemployment in the worst-hit regions of Europe and head off the prospect of life-long joblessness. But political analysts say it is a case of too little, too late.
Schulz, 57, who finished high school but did not go to university and began his career as an apprentice bookseller, said he had recently taken part in a debate where he was challenged by a Spanish woman over the issue of young people being abandoned for the sake of rescuing wealthy banks.
"She effectively raised the question: 'You have given 700 billion euros for the banking system, how much money do you have for me?'" he said. "And what is my answer?
"If we have 700 billion euros to stabilise the banking system, we must have at least as much money to stabilize the young generation in such countries," he said.
"We are world champions in cuts, but we have less idea ... when it comes to stimulating growth."
"THREAT TO THE UNION"
Over the past 40 years, rising incomes in countries such as Spain, Greece, Italy and Portugal have allowed working class families to invest ever more in education, with the expectation that their children would be better placed as a result.
The ability of young people to study and work anywhere in Europe as part of the EU's single market ideal was also supposed to deliver vastly improved opportunities for all.
But instead, as a result of the banking and debt crisis that has cast a shadow over Europe since 2008, those sunny prospects never materialised for millions of young people.
"Greece, Spain and Italy have perhaps the best educated generations they have ever had in their countries, their parents invested a lot of money in the education of their children, everything they did was right," said Schulz.
"And now they are ready to work the society says, 'No place for you'. We are creating a lost generation."
Asked how he would tackle the issue, the Socialist party leader said it was in part about cutting through bureaucracy and putting money to work directly where it was needed.
He gave the example of Greece and investment in solar energy. If traditional methods are followed, a decision is made in Brussels, money is mobilised somewhere else, an investment programme is drawn up, the money is disbursed to the central government in Athens, then goes to several ministries, and finally ends up with a local or regional authorities to invest.
"By that time, we are much older," he said.
"In my mind, direct links between the European Union and regional and local authorities is more needed than ever."
The alternative is a system that puts the social fabric of Europe under ever greater strain, resulting in the dire youth unemployment statistics now prevalent in Greece, he said.
"That is a threat for social cohesion, and if the social cohesion in such countries fails, the country explodes. This is the threat for the European Union as a whole." (Additional reporting by Robin Emmott and Charlie Dunmore Editing by Jeremy Gaunt.)