The butter mountains and milk lakes that made Brussels a byword for waste and inefficiency are to make a return in response to plummeting world dairy prices.

EU officials are to buy up and store 30,000 tonnes of butter and 109,000 tonnes of skimmed milk powder in the next few months as part of a series of moves agreed yesterday to use the EU budget to prop up European farmers.

The U-turn, after several years of liberalising free trade policies, was criticised by producers around the world as a step back into the protectionism that led to the Great Depression of the 1930s.

Fears were raised that new subsidies for a range of dairy products, combined with the new dairy mountains, will trigger a damaging spiral of tit-for-tat measures around the world.

Brussels became synonymous with butter mountains and wine lakes in the 1970s and 1980s as it bought up tonnes of surplus produce under the Common Agricultural Policy.

The butter mountain peaked at more than 1,200,000 tonnes in 1986 and skimmed milk at more than 1,100,000 tonnes in 1976.

These vast stockpiles have dwindled to nothing as the EU tried to drop its reputation for spending much of its budget propping up farmers, but moves to scrap the provision for emergency buying and subsidies were blocked by the French government last year.

The re-introduction of hand-outs for farmers to top-up the market price of butter and other dairy products could also be the final death-knell for a new world trade deal to open up markets, especially if the new US administration decides to follow suit and further protect its farmers. Oxfam warned yesterday that the main losers of such protectionism will be producers in Africa.

Warnings of a new world trade war came from New Zealand, where the government cannot compete with EU or US subsidies.

“People need to be reminded that the 1929 share market crash did not directly create the Great Depression but politicians did,” said Philip York of New Zealand’s Federated Farmers.

“Protectionist legislation, like America’s infamous Smoot-Hawley Tariff Act of 1930, became a template for protectionism copied around the world. Maybe we need to send all Euro MPs and their eurocrats some history books.”

Michael Mann, spokesman for the EU’s agricultural directorate, denied that butter mountains would be re-created. “We have a particular situation on the market where prices being received by farmers are particularly low, so there is an automatic mechanism that will come in in March to buy butter and milk powder to stabilise the price.

“We are not anticipating a return to the old days of butter mountains and milk lakes. This is a temporary crisis situation on the market.”

Britain, which has pushed for subsidies to be scrapped, said that they would nevertheless benefit farmers in Northern Ireland who have been pleading for help to stay solvent.

Elise Ford, Head of Oxfam International’s EU office, said: “With such measures, the European Union is undermining the possibility of finding global solutions to hunger and to make agriculture work for the poor. It can unleash a series of responses from other countries that could be dangerous in the long-term.”

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