* Commission withdraws ban on olive oil jugs in restaurants
* Farm chief says proposals lacked consumer support
* Move follows accusations of interference by Brussels (Adds reaction, background)
By Charlie Dunmore
BRUSSELS, May 23 The European Commission has torn up new rules on how restaurants should serve olive oil less than a week after unveiling them, following widespread ridicule and accusations of unwanted interference.
Last week, the Commission said restaurants would be banned from serving oil to diners in refillable glass jugs or dipping bowls from next year. Instead, to protect consumers from fraud, restaurants would have to use sealed, non-refillable bottles that must be disposed of when empty.
Thursday's u-turn shows how sensitive the EU executive is to accusations of unnecessary meddling in people's lives, at a time when surveys show voters are losing faith in the European Union over its perceived mishandling of the bloc's debt crisis.
At a summit on Wednesday, the new olive oil rules were firmly criticised by Britain and the Netherlands.
"This is exactly the sort of area that the European Union needs to get right out of, in my view," said British Prime Minister David Cameron, who wants to claw back powers from Brussels ahead of a potential referendum on Britain's EU membership in 2017.
"It shouldn't even be on the table, to make a false pun."
Announcing the climb-down, EU farm commissioner Dacian Ciolos told a news briefing that he had taken the decision once it became clear that consumers were against the plans.
"This is crucial in my view, so I've decided to withdraw this proposal and not submit it for adoption," he said.
"I wanted to come here today to demonstrate that I've been very alive to the current debate in the press."
OLIVE OIL POLICE?
Britain's environment and farming minister welcomed the decision, saying common sense had prevailed.
"I'm glad the Commission has seen sense and backed down on these arbitrary rules," said Owen Paterson. "They would have interfered with businesses, imposed unnecessary costs and taken choice away from consumers."
But EU farming lobby Copa-Cogeca said the Commission had ditched rules that had been discussed for over a year and would have benefited olive oil producers and consumers.
"It is totally unacceptable that the Commission has done a complete u-turn and has succumbed to political pressure like this without any discussion with member states and industry," Copa-Cogeca Secretary General Pekka Pesonen said.
Attempting to deflect a barrage of questions from the press, Ciolos said he would propose revised rules to protect olive oil producers and consumers following further consultations with manufacturers, consumer groups and the restaurant industry, and promised to avoid any unnecessary red tape.
One of the first questions raised after the ban was presented was how on earth it was going to be enforced, with critics wondering whether there would now be "olive oil police" circulating at night to check on restaurants.
But it was also questioned whether the ban was really about protecting consumers or more about supporting olive oil producers in southern Europe, with Greece, Spain, Italy and Portugal all suffering as a result of the economic crisis.
These countries are responsible for nearly all of Europe's annual olive oil output of about 2.2 million tonnes, equivalent to nearly three-quarters of total global production. Exports from top producer Spain alone were worth 1.8 billion euros ($2.3 billion) in 2011. (Additional reporting by Peter Griffiths; editing by Luke Baker and Keiron Henderson)