The European Union's executive set out plans on Friday for a new 6.5 billion-euro ($8.8 billion) fisheries fund from 2014 to 2020, which it said would boost EU coastal economies and improve the sector's sustainability.
The legislative proposals are part of a push to reduce the bloc's fishing fleet in order to take pressure off dwindling EU fish stocks, three-quarters of which the European Commission has estimated are currently overfished.
"No more money will be spent to build bigger vessels," EU fisheries chief Maria Damanaki said in a statement. "The fund will help small-scale fisheries to become more profitable and more viable. It will reverse the decline of many coastal areas and island communities which are dependent on fishing."
The money will be split between the EU's 27 governments, who can then spend it on developing new fisheries equipment, building offshore fish farms, creating business start-ups outside fishing and marine conservation measures.
Governments will not, however, be allowed to fund construction of new fishing vessels or measures that increase the capacity of existing ones.
Other proposed changes include the abolition of subsidies for scrapping old fishing vessels, which was originally designed to help reduce the size of the EU fleet.
"The EU has tried this, and it hasn't worked," the Commission said, "because for each scrapped vessel another was being upgraded, effectively increasing the capacity of the fleet."
The Commission also proposed withdrawing EU subsidies from those found to be involved in illegal fishing.
Environmental campaigners welcomed the new sanctions on illegal fishing, but said the proposals gave member states too much freedom to continue funding fleet modernization and thus maintain current overcapacity.
"The EU made two commitments on subsidies: to phase out subsidies that contribute to illegal fishing, and to phase out subsidies that contribute to over-capacity," Markus Knigge, fisheries adviser to the Pew Environment Group, told Reuters.
"With respect to illegal fishing, I truly believe that they do a good job, I really believe that they have advanced. But on capacity, I think that they are tweaking around at the margins."
The EU has the world's third-largest fishing fleet after China and Peru, with a total catch worth 8.2 billion euros ($11.7 billion) in 2007, and the sector wields considerable political power in some member countries.
With more than 80,000 EU-registered vessels competing to land dwindling numbers of fish, quarrels over fishing quotas regularly break out between major fishing nations such as Spain, France and Britain.
The Commission's proposals must now be approved by EU governments and lawmakers before becoming law, a process that could take up to two years.