The Swedish government is due to retain a subsidy on fuel taxes for farmers in a bid to aid dairy producers reeling from a continent-wide price squeeze, local media reported on Sunday.

The center-left government coalition has scrapped plans to remove the subsidy in its fall budget, spending 300 million SEK (35 million U.S. dollars) to keep it in place, Rural Affairs Minister Sven-Erik Bucht said.

"This is a sign that the government is taking the milk crisis seriously," Bucht told daily newspaper Dagens Nyheter, adding that the ruling coalition of the Social Democrats and the Green Party had secured support from the Left Party for the proposal.

Swedish trade group LRF has estimated that five farmers pull the plug on their dairy operations every week as the global milk surplus and Russian trade embargos, which ban the import of food produced in the EU, take their toll.

Those conditions have slashed Swedish farmers' milk prices by 30 percent over the past year, the paper reported.

"The price of milk is down at the same level as in the 1980s, and who wants to work today drawing the same salary as then," said Erik Ohman, a dairy farmer in the north of Sweden.

Minister Bucht said the government will propose nearly 1 billion SEK in public spending to help milk farmers through measures such as credit guarantees and animal care.

Sweden's center-left government is due to present its fall budget in parliament on Sept. 21. (1 U.S. dollar = 8.46 SEK) Endit

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