A House of Lords report has ruled out helping fishermen with high fuel costs and says withdrawal from the Common Fisheries Policy is not an option.
The report from a committee chaired by Lord Sewel is a mid-term review of European fishing subsidies.
Lord Sewel said subsidising fuel prices was "completely" wrong when there was over-capacity within Europe.
The Scottish Fishermen's Federation said it had already reduced its fleet and was now being "left to the wolves".
Lord Sewel told BBC Scotland the last reform of the CFP in 2002, which handed responsibility for a reduction in the size of fleets back to member states, had been a "complete failure".
Being left to the wolves will certainly achieve a reduction in capacity, but it will be in the form of a collapse of areas of the industry plus the infrastructure and communities which support it
Bertie Armstrong Scottish Fishermen's Federation
He said the size of the EU fishing fleet was unsustainable due to the reluctance of some member states to reduce their fleets.
This was not the case in Scotland, the Labour peer added.
"If we look at what has happened in the UK, particularly Scotland, over the past few years, we see a very robust attitude to the size of the fleet and we have gone through significant decommissioning programmes.
"There can be a good case made that the balance, certainly in Scotland, is about right at the moment."
The Lords report recommends that it should be left to the market "to precipitate exits from the national fleet, notably through fuel prices".
Lord Sewel said: "Subsidising fuel prices seems to me to be completely the wrong way to go.
"Many industries are facing difficulties because of increased fuel prices and are having to confront a difficult market.
"Where you have got, on a European level, over-capacity, it seems to me to be quite illogical to maintain that over-capacity by subsidising fuel."
The Scottish Fishermen's Federation (SFF) reacted angrily to the report.
SFF chief executive Bertie Armstrong said: "The report draws the general conclusion that EU member states have been slow to reduce fleet capacity to match the available quota.
"The solution recommended is to leave the price of fuel to do its own decommissioning of the fleet through bankruptcy and also to direct any aid on additional decommissioning schemes.
"Neither the conclusion nor the solution makes any sense for Scotland - which has actually addressed overcapacity - a fact noted in the body of the report."
He added: "Being left to the wolves will certainly achieve a reduction in capacity, but it will be in the form of a collapse of areas of the industry plus the infrastructure and communities which support it."
Environment Secretary Richard Lochhead said the Scottish Government would do what it could to support the industry.
"I will be looking at the report in detail but would be surprised if on the one hand the committee agrees with the Scottish Government that the Common Fisheries Policy has failed but on the other says it should stay in place," he said.
"The Scottish Government's fundamental objection to the CFP is that 27 member states, some of which are landlocked, sit round a table in Brussels deciding the future of Scotland's fishing communities.
"Scotland needs more say over the management of our rich fishing grounds off our own shores to secure a sustainable future for the industry."
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