BERLIN (Reuters) - The German government on Wednesday watered down plans to legalise cannabis, presenting legislation that would allow private cultivation and distribution through non-profit groups but not widespread sales of the drug in shops.

The legislation also foresees a pilot project for a small number of licensed shops in some regions to test the effects of a commercial supply chain of recreational cannabis on public health, the protection of minors and the black market.

Acquiring and possessing up to 25 grams of recreational cannabis for personal consumption would also be made legal.

"The previous cannabis policy has failed. Now we have to go new ways," Health Minister Karl Lauterbach said.

Wednesday's announcement comes after Berlin held talks with the European Commission on a cornerstone paper the German government issued in October.

The ministries involved in drafting the legislation - health, justice and agriculture - did not give a timeline for the plan.

Many European countries, including Germany, have already legalised cannabis for limited medicinal purposes. Others have decriminalised its general use, while stopping short of making it legal.

(Reporting by Friederike Heine, Editing by Rachel More)