The European Union (EU) has agreed to maintain controversial fishing subsidies, sparking a sharp response from environmental groups who say the payments contribute to overfishing of already stressed stocks.

After tough, drawn-out talks which went into the night, a draft statement, agreed on Wednesday morning said that EU ministers would keep subsidies for modernising fishing fleets through to 2017 as part of a wider policy to put the industry on a sustainable basis.

The subsidies pay for modernising existing vessels or taking older boats out of the fleet and are jealously guarded by the main fishing powers France, Portugal and especially Spain.

Critics, however, say this only increases fishing capacity at a time when the focus should be on reducing the catch so as to allow stocks to recover.

The Greenpeace environmental group dismissed Wednesday's accord under the headline "European ministers want to continue bankrolling overfishing."

It said EU ministers were "selling out to the short-term economic interests of the industrial fishing industry, instead of putting Europe's fisheries onto a path of recovery.

"Many parts of the EU fishing fleet are already able to catch two to three times more than is sustainable, but ministers ... have signalled that they want to continue funnelling subsidies into the modernisation of vessels."

Under current arrangements EU funding has increased the capacity of fleets and led to widespread over-exploitation of fish stocks.

The new plan is to help fleets switch to more sustainable fishing. It is part of the 10-year reform of the Common Fisheries Policy (CFP).

In June, the EU agreed a series of reforms, chief among them proposals to set so-called Maximum Sustainable Yields (MSY) the maximum amount of fish that can be caught without compromising a stock's ability to reproduce.

Scientists say, for example, that 80 per cent of Mediterranean stocks are overfished although the situation has improved in Atlantic waters.

Combined, the EU counts as the world's third biggest fishing power, making what it does a key marker for the global industry.