MILAN, July 16 (Reuters) - Italy, a major milk producer in the European Union, urged Brussels on Thursday to earmark 600 million euros ($846 million) in 2009 and maybe as much next year to help dairy farmers quit the business, reducing oversupply.
EU dairy markets have deteriorated sharply over the last 12 months, triggering farmers' protests across the 27-country bloc. After a rise in 2007, prices have dropped substantially, with serious effects on producers' incomes. Italy's Agriculture Minister Luca Zaia, a strong supporter of local farmers, has prepared a proposal for the European Commission to use 600 million euros from agriculture support funds to help farmers with marginal businesses to leave the market.
Such measures would cut EU milk output by 3 million tonnes a year, or by 2 percent, and may be extended into 2010. They would help restructure the bloc's dairy sector, the minister said.
"We have a chance to withdraw 3 million tonnes of milk from the market each year, or a total of 4 percent, by paying farmers about 20 euro cents for every litre of (their) quota," Zaia said in a statement.
Zaia said he expected many small farmers across the EU to cheer such plan because they have been hit hardest by the crisis and were doomed to close down anyway.
Zaia said his was a counter proposal to the European Union's decision to withdraw considerable amounts of powdered milk and butter from the market by the use of intervention that would cost Brussels 1.2 billion euros in 2009 and 2010.
On Monday, the EU farm ministers agreed to extend public buying of butter and skimmed milk powder by six months to prop up dairy markets hit by oversupply and poor demand.
Zaia said he disagreed with the EU intervention decision and would push for his plan.
EU Agriculture Commissioner Mariann Fischer Boel is due to issue a report on the state of EU dairy markets on July 22, possibly with proposals for more action. (Reporting by Svetlana Kovalyova, editing by Anthony Barker)