EUROPEAN Union Agriculture Commissioner Mariann Fischer Boel is about to gut the global dairy industry.

Dr Fischer Boel is about to slap subsidies of up to 50 per cent on the trading bloc's dairy exports, undermining Australian farmers' hopes of a milk price recovery.

Australian and New Zealand dairy industry leaders have condemned the move, arguing it allows EU dairy exporters to undercut them in an already depressed global marketplace.

But Dr Fischer Boel is unrepentant, arguing anxious European farmers need help.

"The Commission stands ready to make full use of our available instruments (subsidy systems) to support the market and the producers' income," Dr Fischer Boel said.

"Our exporters are no longer able to compete. This situation is aggravated by the already existing difficulties . . . as a result of the financial credit crisis," she said in a statement last week.

Australian Dairy Farmers president Allan Burgess said any hope of a quick recovery in milk prices had become "much more difficult following the EU decision".

"We've been belted by the global financial crisis and now belted by the European Union," Mr Burgess said.

"On top of that we have (Federal Government) policies on emissions trading that will flow back to the farm gate plus a cost-shifting policy on quarantine that will cost agriculture an extra $40m a year."

From next month, the European Commission will establish an "intervention" or floor price of $US2909 a tonne for butter compared to the current global price of $US1800-$2000 a tonne, with a similar premium on milk powders.

European dairy traders will also be able to apply for an "export refund" from the commission to cover the shortfall between the domestic intervention price and what they receive in the global market for butter, cheese and milk powders.

Analysts fear that given the EU supplies a third of the world's dairy exports, the global price will now be capped at the EU domestic price minus the export subsidy.

The European Commission's decision worsens the already grim outlook for Australian farmers, following dairy processors' announcements in recent weeks that farmgate milk prices would be slashed by up to 39 per cent from next month.

Fonterra GlobalTrade managing director Kelvin Wickham said the EU subsidies would put further pressure on the world market at a time that is already difficult for dairy exporters everywhere.

"(It) will potentially delay recovery of the market to more sustainable price levels," Mr Wickham said. "We are deeply disappointed by the news from the EU that it will reinstitute export refunds."

Mr Wickham said the EU had made a commitment to abolish export refunds in the context of the Doha Trade Round and this latest announcement by the commission underlined the importance of the conclusion of the round.

National Farmers' Federation chief executive Ben Fargher said the EU decision showed "how not getting a WTO result out of Geneva last December . . . was a lost opportunity that will hurt farmers commercially."

"Given the global financial crisis and this announcement, the Australian Government should respond in two ways.

"They should strongly publicly rebuke the EU for this move and they should provide a stimulus package to the Australian agricultural sector, not via export subsidies, but through a range of responsible measures in this year's Budget (as per our Budget submission)."

Federal Agriculture Minister Tony Burke said the Governemnt was "very disappointed in the EU's decision to reintroduce dairy export subsidies".

"It shows the importance of changing the way we support the farmers, so that we are not simply focused on drought support," Mr Burke said.

Mr Burgess said farmers were already struggling to come to terms with this season's dramatic price slump.

"Next season's opening price is looking just as troubling," Mr Burgess said.

He said the Federal Government should implement a raft of assistance measures to assist farmers.

But Mr Burgess failed to give any details on what forms of assistance the industry was seeking, apart from more research and development funding and fair treatment in regard to drought assistance.

The EU dumped subsidies on cheese and butter in 2006-07, in response to a boom in global prices.