The EU's Agriculture Commissioner rejected appeals by farmers Wednesday to lower milk quotas to ease the glut of dairy products on the market.
Mariann Fischer Boel however, said the EU executive was proposing that member states fast-track aid payments and loans, among other measures, to dairy farmers affected by the collapse of prices for milk, cheese, butter and other dairy products in recent months.
Dairy farmers across Europe have called for more government assistance and to cut milk quotas to lower supplies because a 50 percent drop in milk prices over the last year is forcing them to sell below cost.
"We will continue to use all the measures we possess to stabilize the market," she said. "We will not reverse our policy of gently phasing out quotas."
Her stance was sure to infuriate farmers. Some 400 dairy farmers with tractors were to rally near EU headquarters later Wednesday to protest EU refusals to reverse plans to scrap milk production quotas across the 27-nation bloc.
They argue that reducing quotas now will resolve the price crisis and save their livelihoods.
But Fischer Boel said reopening a delicate reform deal reached last year among EU governments to phase out milk quotas by 2015 would spell disaster for the dairy sector.
"Putting this into doubt would only create uncertainty and would do nothing to help the situation," she said.
She said the production of milk was already 4.2% below the overall quota limits available.
"So the real reason for the crisis is certainly the economic situation in which consumers find themselves," said Fischer Boel, referring to the global economic crisis.
The EU farm chief warned farmers there was "no magic wand" to solve the crisis, but laid out proposals that could ease the financial burdens on farmers, many of whom face trouble meeting bank payments.
Fischer Boel suggested that EU nations extend storage of unsold butter and powder milk until February 2010 to reduce market supplies and better promote the consumption of milk to consumers.
She also recommended early retirement buy-outs for farmers and suggested governments look at encouraging the slaughter of large dairy herds to reduce production.
The European Commission said it had already bought and stored nearly three times its normal limits for butter and double the normal limit for skimmed milk powder to reduce supply on the market. It has also restored export refunds to farmers, paying them subsidies on top of low market value prices.
So far some 81,900 tons of butter and 231,000 tons of milk powder have been bought.
Fischer Boel said the EU has spent some $851 million on the aid measures.
The bloc's agriculture ministers will debate and try to agree on the proposals in September.