Germany's shift to green energy and away from nuclear power and fossil fuels is one of Merkel's flagship policies but the cost of ballooning subsidies is threatening to undermine it

BERLIN, March 30 (Reuters) - Regional politicians in Germany threatened on Sunday to block the government's long-awaited planned reform of its subsidies for renewable energy, piling pressure on Energy Minister Sigmar Gabriel as he finalises a draft law.

The reform, closely watched by power markets, is due to go to cabinet on April 8 and Chancellor Angela Merkel meets the premiers of Germany's 16 federal states on Tuesday to try win their backing.

Germany's shift to green energy and away from nuclear power and fossil fuels is one of Merkel's flagship policies but the cost of ballooning subsidies is threatening to undermine it. The reform is aimed at scaling back incentives.

Christine Lieberknecht, the conservative premier of the state of Thuringia, told the Tagesspiegel newspaper that the plans could "under no circumstances" remain as they are.

She, like Bavarian premier Horst Seehofer, objects to planned reductions in support for biomass, which she described as "disproportionate".

"Most states do not want to accept the law as it is," she told Monday's edition of the paper, according to excerpts released in advance.

The premier of the northern state of Schleswig Holstein has also opposed the proposals.

The plan, a balancing act between maintaining growth in the renewables sector and keeping heavy industry on board with affordable power, envisages cuts of up to a third in green subsidies by 2015 but also reduces support for industry.

Economy and Energy Minister Gabriel, a Social Democrat (SPD) in the right-left coalition with Merkel's conservatives, told German television he saw possibilities for agreement on Tuesday.

"We will see if we get there on Tuesday, we will try. We just have to see that we must decide," he told ARD television.

Gabriel has dropped an initial proposal to make industrial firms pay renewable energy surcharges for existing on-site power plants. That would have cost them 500 million euro euros a year.

The plans are likely to get through the Bundestag lower house thanks to the grand coalition's overwhelming majority but they could face delays in the Bundesrat upper house which represents the federal states. (Reporting by Madeline Chambers; Editing by Angus MacSwan)

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