Butterflies that flourish on grassland across Europe are in steep decline, indicating a catastrophic loss of flower-rich meadows in many European countries.

Populations of 17 butterfly species widely found in Europe, including the adonis blue, Lulworth skipper and marsh fritillary which fly in Britain, have declined by more than 70% in the past 20 years according to a new study by Butterfly Conservation Europe.

The dramatic decline in butterfly numbers indicates a wider loss of biodiversity, with other insects such as bumblebees, hoverflies, spiders and moths, as well as many plants and birds, disappearing along with the loss of traditional grassland.

Martin Warren, chief executive of Butterfly Conservation (UK), said the data from 3,000 sites in 15 countries showed an urgent need for EU funding to support sustainable "high-nature-value farming".

Flower-rich grassland created by traditional livestock-grazing and hay-making over centuries of human occupation is either being abandoned, overgrazed or ploughed up for intensive farming, particularly in eastern Europe and mountainous regions.

In areas such as the Picos mountains in Spain, most traditional farmers are in their 80s and their hay meadows and milk and cheese businesses are being abandoned by younger generations because they are no longer profitable.

Many of Romania's 4.5 million farmers farm just half a hectare in environmentally friendly ways but are too small to qualify for any payments from the Common Agricultural Policy.

"These people are farming probably the most sustainable agriculture in the world but they don't get any help for it whereas if they ploughed up and intensified their land they would get huge payments from the EU," said Warren. "We need EU payments to help support social economics in rural areas and keep people on the land."

UK species in decline across Europe include the wall butterfly, with a 65% decrease in the UK since 1976 compared with a 72% decline over the last 20 years in Europe, and the Lulworth skipper, whose numbers have plummeted by 87% in the past 10 years in the UK. The dingy skipper's distribution in the UK has fallen by nearly 50% over the past 20 years, compared with a 37% decline across Europe.

Butterflies are one of the best monitored groups of wildlife in Europe and Butterfly Conservation Europe is pressing for them to be adopted as agricultural indicators in the next round of Cap reform in 2013.