Europe's sugar industry faces a "slow and painful death" without reform, EU agriculture chief Mariann Fischer Boel said, as she unveiled the shake-up.

Farmers who stop growing sugar are to get compensation, amid fears the reforms could mean disaster for them.

The World Trade Organization last year ruled the subsidies, unpopular in many developing countries, were illegal.

The European Commission hopes that member states will approve its plans - which will see subsidies cut by 39% by 2008 - before the end of the year. Developing countries who export sugar to Europe should also be eligible for compensation.

Sweeteners

The Commission's Ms Boel said: "There is no alternative to profound reform.

"I am convinced that EU sugar producers have a competitive future but only if we act now and act decisively to prepare them for the challenges ahead."

The EU has guaranteed minimum prices for nearly 40 years as part of the Common Agricultural Policy (CAP) and the reforms are likely to face fierce opposition in several European countries.

To cushion the impact of the changes, the Commission is offering a number of sweeteners.

It will pay farmers compensation equivalent to 60% of the subsidy cut and extra support for farmers wishing to leave the industry altogether.

The changes could have a devastating effect on Ireland, Greece, Italy and Portugal, with output either being severely reduced or phased out, internal European Commission documents seen by the BBC have revealed.

It is thought that France and Germany - Europe's two largest producers and among its most efficient - and the United Kingdom will be largely unaffected.

Developing countries

The reform is likely to be welcomed by many developing countries, who argue that subsidies have resulted in large surpluses being dumped on their market, making it difficult for their own producers to survive.

However, the reforms are also opposed by some non-EU producers who sell sugar into Europe under preferential terms.

The EU has pledged an eight-year programme of assistance for Africa, Caribbean and Pacific (ACP) countries which depend on income from sugar exports, including $40m (£21m) of support next year.

"We have tried to be constructive and explain the crippling effect that it will have on our industries and economies," Dr Riya Insanally, senior trade adviser to the Guyana High Commission, told the BBC.

"But we seem to be secondary to the zeal of the reformers to push ahead with these proposals."