* Panel calls for EU-wide watchdogs monitored by Brussels
* Would be first pan-EU media regulation if enacted
* Publishers say no need for more media regulation
By Claire Davenport and Ethan Bilby
BRUSSELS, Jan 22 (Reuters) - A proposal to set up powerful media regulators across Europe monitored by Brussels provoked a backlash on Tuesday from publishers who said it would have a devastating impact on press freedom.
A high-level panel, including a former German justice minister, issued an EU-commissioned report on Monday suggesting member countries set up media watchdogs able to investigate complaints, impose fines and remove journalists' "status".
The independent "media councils" would be monitored by the European Commission, the report said - a move that would amount to the first attempt at pan-European media regulation.
The European Publishers Council lobby group said it was "taken aback" by some of the recommendations.
"Any notion of harmonised rules of the game, monitored by the EU, is anathema to press freedom - the very thing the group was tasked to protect," EPC Executive Director Angela Mills Wade said in a statement.
The EPC, made up of leading publishers, said there was no need for new media regulation.
Its members include Thomson Reuters, as well as German group Axel Springer, Daily Mail and General Trust, the Financial Times Group, Reed Elsevier and Rupert Murdoch's British newspaper arm News International.
The European Commission set up the panel to look into ways to ensure newspapers and media groups were free from political influence and did not abuse their power.
The experts' report said the independent media councils would operate like ombudsmen and look into complaints against media organisations and allegations of conflicts of interest and abuse of power by the companies or their staff.
The European Commission said on Tuesday the proposed ability to remove journalists' "status" did not amount to the power to dismiss a reporter.
"There is no possibility of the EU sacking journalists - that should be clear to anyone who reads the report," said the EU's telecoms regulator Neelie Kroes, who first brought the panel together in October 2011.
Kroes said the report would trigger a needed debate about the protection of free speech and the Commission would come out with more concrete recommendations after discussions.
EU member states have not yet reacted to the recommendations.
The panel's members included former German justice minister Herta Daeubler-Gmelin, former advocate-general at the European Court of Justice Luis Miguel Poiares Pessoa Maduro, Latvia's former President Vaira Ve-Freiberga and Ben Hammersley, a technology commentator.
The EU experts' report follows a British inquiry into a phone hacking scandal at Murdoch's now defunct News of the World newspaper.
The British inquiry by judge Brian Leveson recommended a new independent body be set up, possibly with statutory powers over the press, instead of the current system of self-regulation the British industry wants to retain.
In the wake of the Leveson inquiry, British Prime Minister David Cameron, who opposes statutory regulation, urged newspaper bosses to come up with an effective system of self-regulation.
British actor Hugh Grant, a vocal critic of the British tabloid press, visited Kroes In June 2012 to lobby in favour of pan-European regulation of newspapers.