The European Commission is to shelve its plans to reform the copyright levy system for consumer electronics after concluding that the political fallout from such an initiative would be too high.

Despite pledging to propose reforms before the end of the year, Commission President José Manuel Barroso has shied away from a fight with Europe's artistic community and the French government, two vocal critics of the planned reform.

"The Commission has decided more reflection is required on this complex issue. When it is ready, it will bring it on the agenda of the Commission," said an EC spokeswoman. However, officials have admitted that calls for "reflection" are a euphemism for freezing the dossier.

The turnaround comes just weeks after a draft Commission paper recommended reform of a system the EU's executive considered anachronistic and patchily applied. But Commission insiders have revealed that Barroso felt the political climate was too sensitive, and that his public image already appeared too intimate with business interests.

Copyright levies are used in 20 out of 25 EU member states to compensate artists: they skim a fee off the price of any DVD recorder, MP3 player and blank disc sold on the legal basis these will be used to make unlicensed private copies.

The scope and extent of copyright levies varies from country to country. France, for example, applies a levy of €6 ($8) on an iPod with 4GB memory. Germany has a levy of €2.56 ($3.38) on the same product, while the Netherlands and Belgium impose no levies on iPods at all. The draft recommendation also says that consumers often are forced to pay copyright fees when they buy personal computers or MP3 players, and again when they download music legally online.

The key opposition came from Paris. France's Prime Minister Dominique de Villepin wrote to Barroso earlier this month warning that the French government was fiercely opposed to any reforms. France claims a quarter of all copyright levies collected within the EU. French President Jacques Chirac has made it clear he blames the Barroso Commission and its economic reform plans for the French electorate's rejection of the European Constitution in a May 2005 referendum.

The artistic community was late to organize against the proposals, but in October Spanish screen icons Pedro Almodovar and Penelope Cruz led a host of artists' groups in launching the 'Culture First' campaign. The coalition of lobbies includes independent music trade group Impala, European authors' group GESAC, international authors' group CISAC, European film directors group FERA, international performing artists' group GIART and European actors' federation EuroFIA.

"Although it may have appeared like a desperate, last-minute appeal, it had an effect," said one EU source. "Barroso and others are thinking of their political career after the Commission, and no-one dares have the artistic community against them."

Mark MacGann, the head of the Copyright Levies Reform Alliance (CLRA), an alliance of business and IT companies, said he was "frustrated and disappointed" at the Commission's "capitulation" to Paris. "With this decision, it is clear to industry that the Commission has abandoned any serious efforts to establish transparency, efficiency and fairness in the way these levies are set, collected and distributed, let alone its publicly stated ambition to promote 'better regulation' in Europe," said MacGann, who is also director general of EICTA, the European information and communication technologies association.

He said that hopes for use of digital rights management (DRM) to plug a gap were forlorn as they will only cover the electronic version of a song -- whereas the levies are also slapped on blank CDs, computers and other IT products, thereby multiplying the measure. "There has been an exponential rise in the use of levies in the digital world," he said, adding that many companies were facing court cases as they were uncertain whether to apply then.