* New EU parliament to debate issue later this year
* Commission hopes for final deal by year's end
* Monsanto says EU market still not tempting
* Green Party says will oppose the draft law
LUXEMBOURG, June 12 (Reuters) - A compromise deal to give European Union states the option of banning genetically modified crops won approval from EU environment ministers on Thursday, bringing the EU closer to ending years of deadlock over GM cultivation.
Widely grown in the Americas and Asia, GM crops in Europe have divided opinion, with strong opposition in many countries, including France and Germany, while Britain favors them.
Thursday's compromise deal drew criticism from both opponents and supporters of growing GM food in Europe.
Monsanto, maker of the only GM crop grown in the EU, said if the law were enacted as drafted, the company would continue to focus its investment in other parts of the world. The European Green Party, meanwhile, described the deal as "a Trojan horse" that would open the door to GM crops across Europe.
At a meeting in Luxembourg, EU environment ministers from 26 of the 28 member states backed the new proposal, which still needs approval from the European Parliament. Only Belgium and Luxembourg abstained.
France, whose constitutional court has already issued a ruling to uphold a domestic ban on GM maize, welcomed the proposal.
"This new system is going to guarantee a choice for all states. Nothing will be imposed," French Environment Minister Segolene Royal told the Luxembourg meeting.
Under the proposal, the European Commission, the EU executive, would retain the right to ban or approve any particular GM crop throughout the European Union on the basis of a scientific assessment.
But in the cases where the Commission approves a crop, individual states could ask for a ban and would also have the right to ask the Commission to ask companies to exclude them from any new requests for approval for a GM crop.
German Environment Minister Barbara Hendricks said the proposal opened the way for a formal ban in Germany and welcomed the idea the Commission would serve as the middle man.
"The Commission will serve as an intermediary and we're grateful for that. We think it would not be appropriate for sovereign states to negotiate with companies," Hendricks said.
Britain, as a supporter of GM crops, also welcomed the compromise.
"If the European Parliament passes this law, farmers in all regions of the UK will have more power in deciding whether to grow GM crops that have passed a robust, independent safety assessment," British Secretary of State for the Environment Owen Paterson said in a statement.
YEARS OF INDECISION
An earlier attempt to agree a compromise on GM cultivation failed in 2012, when EU ministers were unable to agree. But Thursday's agreement had been expected after EU diplomats in May backed the proposal in a closed-door meeting.
European Health Commissioner Tonio Borg said he hoped that getting backing from the European Parliament would be quick and a final agreement could be achieved by the end of the year.
In the interim, intense lobbying from GM companies and environment groups is likely to continue.
The companies say science supports GM crops and object to the new proposal on the grounds countries could opt out of GM cultivation for social reasons, such as public opposition.
So far, EU authorities have only approved two GM crops for commercial cultivation, and one was later blocked by a court.
That leaves Monsanto's GM maize MON810 as the only GM crop grown in Europe, where it has been grown in Spain and Portugal for a decade.
Brandon Mitchener, a spokesman for Monsanto, said his company would review the regulatory environment in coming years both at a European level and at a national level.
"However, if enacted as currently drafted, this proposal is likely to reinforce the grounds for our already announced decision of investing in GM technology in regions other than Europe," he said in a statement.
The European Parliament's Green group said the deal would open the door to GM crops across Europe and it would oppose it.
"The Greens will use all means at our disposal to prevent this wrong-headed proposal from entering into force," food safety spokesman Bart Staes said.
(Additional reporting by Sybille de la Hamaide in Paris and Nigel Hunt in Miami; Editing by James Macharia)