EU governments can generally pay for up to half a film's budget

The extension comes as the current arrangement on state aid for the film industry was due to run out this month.

Led by France, many member states say their film industries need the public money to be able to better compete against Hollywood imports.

The Commission allows member states to fund up to half of a film's budget.

'Cultural product'

Under the rules, which were first established in 2001, member states must first establish that the movie in question is "a cultural product".

They can further spend more than 50% of a movie's cost if the film in question is considered "difficult", or has a low budget.

A member state can in turn require a film company to spend 80% of the movie's budget within its own boundaries.

"Our aim is to ensure that state aid control continues to ensure optimal and equal conditions for artistic and cultural creation," said European Union (EU) Competition Commissioner Neelie Kroes.

According to the Commission, 926 million cinema tickets were sold last year in the EU, 3.6% more than 2005.

European films accounted for 28% of ticket sales compared with 25% the previous year.