EU member states are working on a fresh proposal for a youth mobility scheme with the UK after an earlier paper by the European Commission was rejected out of hand by Labour in April, it has emerged.

EU sources say the 27 countries hope to come up with viable negotiating points for Brussels in coming weeks to feed into the expected negotiations on a reset of EU-UK relations being sought by the British prime minister, Keir Starmer.

It is thought new proposals would also allow Starmer’s team a fresh start on the issue, including a possible counter-proposal, and minimise any political pushback by Eurosceptics.

The conversation in EU capitals comes as the German chancellor, Olaf Scholz, spoke of a lamentable decline in interaction with the UK’s young people across the EU.

“The contacts between our societies, between Germans and people in the UK, have declined massively after Brexit and the Covid-19 pandemic. We want to change that; if you know each other very well you understand each other better,” Scholz told reporters on Wednesday.

The German ambassador to the UK, Miguel Berger, said it was vital that people understood that youth mobility had nothing to do with migration or free movement. “We hear over and over the argument that [youth mobility] is freedom of movement when it is not, as it is based on visa requirements and limited time periods. People leave after a set time,” he said.

Berger said giving opportunities to young people to work as baristas or au pairs, learn languages or do short-term training in each other’s countries made important connections that acted as a “glue” between the countries in Europe.

He said: “What we want to promote is the contact between our societies, because in the end they are the backbone of our relationships: youth exchanges, sports events, town twinnings. We can’t have a relationship which is only based on politicians meeting.”

The European Commission made a youth mobility scheme proposal in April which would allow citizens to work or study for up to four years, catching many in London and the EU by surprise. Labour, nervous of its Brexit-related toxicity, rejected it within hours while Downing Street dismissed it the following day.

It was subsequently seen as a hasty attempt to quash talks the former British prime minister Rishi Sunak had opened with six EU countries, including France and Germany, for unilateral youth schemes.

Berger said youth mobility schemes were a bilateral competence but the 27 EU countries had agreed to go forward as a bloc, and were all keen to see opportunities resume for young people.

“I know that all the 27 in the European Union have this question of creating additional possibilities for young people very high on their agenda,” he said, adding that the idea was that the scheme would be for everyone, not just the “elite”.

Youth mobility programmes are already offered by many countries including the UK, which has reciprocal schemes that allow two-year stays by young people from Australia, Canada, New Zealand, Korea, Andorra, Japan, Monaco, Iceland, Uruguay and San Marino.

University sources have said youth exchanges, including the Erasmus scheme, had a “return on investment” in the form of “soft power” that was never factored in to Brexit. However, they said the inclusion in the April proposal of a four-year scheme allowing students to study in each other’s countries while paying home fees was a non-starter – and a youth mobility scheme would have a better political chance if students were removed from the equation.

One source in the UK said it was just not viable because there had always been an “imbalance in the flow of students”, with more EU citizens studying in the UK than British students in the EU. This created a disproportionate financial burden on British institutions, something they could not countenance in a youth mobility scheme. And even if EU citizens were allowed to study in the UK, there were still other barriers including the high cost of visas and the high cost of the NHS surcharge.

One alternative to returning to Erasmus being considered at university level is an increase in funding for EU students who want to exchange with a university in a third country.

After talks with Emmanuel Macron at the Élysée Palace in Paris, Starmer said they had discussed his plans to reset relations with France and the wider EU.

“We discussed the situation in Ukraine, as you would expect, the situation in the Middle East, bilateral issues in terms of trade and defence and security, but also the wider reset that I want in relation to our relations, not just with France, but with the EU in general,” he said.

“They were the topics that we discussed as part of the reset, rebuild[ing] and making sure that our number one mission, which is growing the economy, is absolutely central to everything that we do.”