By Balazs Koranyi

COPENHAGEN (Reuters) - Europe's political center left, bruised by election defeats and self-flagellation, needs to accept austerity and the end of the "good times" but stand up for the continent's welfare model, some of its leading thinkers said on Friday.

Budgets may be strained and there is no way around spending cuts, but the left should focus support on the most needy and on sectors where public money has the biggest impact, center-left politicians and intellectuals agreed at a conference in Denmark.

"It is absolutely right that the center left doesn't abandon its commitment to compassionate support for those in the greatest need," British opposition leader Ed Miliband told the Progressive Governance Network, an incubator for leftist thinkers.

Mainstream social democratic parties have been mostly consigned to the opposition in Europe since the financial crisis struck in 2008.

center-left governments rule only a handful of countries and the biggest left-wing victory, last year's election of Socialist French President François Hollande, has been sullied by his rapid loss of popularity.

With more than 26 million unemployed in the 27-nation European Union, the continent's welfare system is under severe strain and has faced spending cuts in several countries.

Nonetheless, social spending as a proportion of output is now at least 6 percent higher than in 2007 on average in the 34 countries of the Organisation for Economic Cooperation and Development, as the numbers of people receiving benefits soars.

"Fiscal discipline is only a means to an end, and that end is that we have an equal society with opportunities for all in a welfare state," Danish Prime Minister Helle Thorning-Schmidt told delegates to the network, founded by leftist leaders including Britain's Tony Blair and Germany's Gerhard Schroeder in 1999.

Former British cabinet minister and European trade commissioner Peter Mandelson said the French experience showed what happened if the left won office without overhauling its old ideology and coming up with practical policies.

"The Socialists rose to power on Sarkozy's unpopularity but it is in need of a governing plan," he said. "Commentators would say it is actually better to come up with a governing plan before you get into power."

The center left has had trouble convincing voters that it has a convincing answer to the financial and economic crisis.

In countries such as Spain and Greece, where they were involved in implementing austerity measures such as raising the retirement age or reducing unemployment benefits, center-left parties have been decimated in elections.

JOBS

In many, they are bleeding voters to hard-left and extreme-right euroskeptical parties who say the mainstream center left has become indistinguishable from the conservatives.

Speakers at the Copenhagen conference said the left should tackle long-term issues such as pension and immigration reform, and focus spending on education, innovation and job creation.

"The current (center-right Swedish) government says the market will take care of job creation. No, the market will not take care of it on its own. We have to support the market," Swedish Social Democratic opposition leader Stefan Löfven said. "We need to help the market."

"We won't be trapped in the conversation that we can't afford the welfare model, because we can," he said.

The biggest challenge may be on Europe's periphery as some countries, such as Greece, have fallen too far and their center-left parties face electoral oblivion.

The Greek economy has shrunk by more than 20 percent since the start of its crisis and even a series of bailouts have failed to offer a ray of hope.

"There is no way out, there is no hope. We do not have a plan that we can show that yes, in three years we'll do this and yes, it will be very painful but the end of fifth year there will be a change and it will be better," Anna Diamantopoulou, a former Greek education minister for PASOK said.

Her party is now in fifth or sixth place in opinion polls, dwarfed by the hard-left SYRIZA movement which rejects austerity and wants Greece to default on its debt.

(Reporting by Balazs Koranyi; Editing by Paul Taylor and Alison Williams)




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