(adds details, quotes, PVS BRUSSELS)
By Michael Hogan and Jeremy Smith
BERLIN/BRUSSELS, Jan 15 (Reuters) - The European Union will reactivate export subsidies for a series of dairy products to help its struggling exporters better compete on the depressed world market, Europe's farm chief said on Thursday.
Suspended since 2007, EU export subsidies would now be reinstated for butter, cheese and skimmed milk powder (SMP) via a series of regular tenders and trade bids, EU Agriculture Commissioner Mariann Fischer Boel said in Berlin. In June 2007, during a period of sustained high prices, the EU set export subsidies for all dairy products at zero for the first time, aiming to make EU dairy exports less attractive for producers and thereby ensure adequate domestic supply.
But since then, increased world supply and reduced EU demand had forced internal prices down to close to or even below intervention levels, she said, with the financial crisis making things even worse for exporters in terms of raising credits.
World dairy prices have also fallen, and Fischer Boel cited several reasons for the market weakness -- such as New Zealand's sales of its surplus dairy products and currency weakness in Russia, a major export market for EU dairy producers.
"In a situation where we have seen devaluation of the Russian currency by between 17 and 20 percent, it is obvious that for Russia ... European products have become more expensive," she told a news conference in Berlin.
EU consumers had also been restrained in their purchases of dairy products following the sharp rises in food prices seen in 2008, although prices had fallen again, she said.
"I certainly do not underestimate the economic difficulties in which some farmers are finding themselves, which is why I am taking action," Fischer Boel said.
As part of its negotiating position for the Doha round of world trade talks, the European Union -- the main user of farm handouts and the top payer of export aids -- had pledged to eliminate export subsidies provided that others did the same.
European Commission officials said EU intervention prices for butter and SMP, set at 2,218 euros ($2,915) and 1,698 euros per tonne respectively, were now higher than world market prices, with internal prices following the same trend.
MORE PUBLIC BUYING
To help the dairy sector, EU countries would be asked to approve extra volumes for butter and SMP above the existing maximum amounts that could be bought into public intervention stores via regular tenders, she said. The frequency of those tenders would also be increased from once to twice a month.
At present, the EU has annual intervention ceilings set at 30,000 tonnes of butter and 109,000 tonnes of SMP, purchased by Brussel at pre-determined prices. For butter, the price paid is 221.75 euros per 100 kg; for SMP, the price is 169.80 euros.
"The first 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder will be bought in at a pre-determined price," the Commission said in a statement issued in Brussels.
"We expect that this quantity of butter will be taken quite quickly and consequently it will be necessary to support the market beyond this limit," it said.
Under the intervention system, a commodity is "bought in" to stores, either private or public, until prices rise again to a level attractive enough for it to be sold into local EU markets. (Editing by William Hardy)