Consumer panic across Europe threatens a major crisis for the EU's Common Agricultural Policy as the true extent and cost of the BSE crisis becomes known.

European agriculture ministers meeting in Brussels on Monday agreed new measures aimed at boosting consumer confidence and arresting a catastrophic collapse in the beef market.

The consumer panic has hit Germany the hardest with a collapse in demand of 50 per cent, with Greece, Italy and Spain down by 40 per cent, and an EU average beef market decline of 27 per cent. The prices many farmers get for their beef are down 36 per cent.

The commission had budgeted a market decline of 10 per cent and agriculture commissioner, Franz Fischler, told ministers yesterday that: "The crisis on the beef market goes further than one might think, the latest market indications are alarming."

Measures already agreed mean that the EU is obliged to buy unsold beef - which could generate a surplus of 785,000 tonnes and cost the EU three billion euros, three times the amount budgeted for in the current union budget.

"We really are at the very limit, if not beyond, in terms of what we can fund with the EU budget," Franz Fischler said. "With all the will in the world, and fully recognising the dire straits farmers are in at the moment, we have zero room for manoeuvre."

The situation is set to precipitate a crisis in the Common Agricultural Policy, which accounts for a third of all EU spending. The European parliament discuss the commission measures on Thursday and is expected to call for a major shake-up of agriculture policy.

In a desperate attempt to revive the market, European agriculture ministers agreed to a total ban on the sale of beef products containing any part of the spinal cord. The ban, if implemented, will spell the end of popular cuts of meat such as T-bone and rib-eye steaks which are already heavily regulated. Similar "beef on the bone" bans were withdrawn in the UK after being widely derided, ministers will decide whether the measures will affect British beef later in February.

Speaking to MEPs on the European parliament's Committee on Agriculture and Rural Development on Tuesday, Swedish president-in-office of the council of agriculture ministers, Margareta Winberg, spoke of the need for political leadership and warned of panic measures.

"Meat consumption has fallen drastically in some places and consumers are worried," she said. "We must show political leadership. We must avoid deciding on measures which in the short term may appear forceful and confidence inspiring, but which in the longer term may create further problems. Our measures must have a scientific basis and take account of the precautionary principle."

Admitting that for some EU countries emergency measures to ban animal protein in feedstuffs were prompted less by science than the consumer scare, Winberg spoke of a "long-term, stable solution to the BSE problem".

"Many countries see an extension or even the permanent introduction of the ban on the use of meat and bone meal in feedstuffs for food producing animals as unavoidable. This is not because they now see that there are scientific reasons for such a ban but because the mistakes which occurred in the handling of feedstuffs have seriously damaged consumer confidence in how feedstuffs are handled on farms and in industry," she said.

Julian Morris, director of the Institute of Economic Affairs' environment and technology programme, said that media headlines concerning the crisis should read "mad consumer disease" claiming: "The citizens of Europe have been fed the lie that government can protect them form all possible risk. It is a human response to diet of dubious information provided by a combination of officials, scientists and the media."