EU wine sector set to see major shake-up

"A number of alarm bells are ringing", Ms Fischer Boel's document – seen by EUobserver – states. If the bloc's wine sector "is not thoroughly overhauled in the very near future there is a strong chance that the whole system will slip into a crisis from which it cannot recover," it continues.

Although it remains the world's number one producer, exporter and consumer of wine, the EU is seeing increasing competition from "new world" wines from the US, Argentina, China, Australia, South Africa and Chile.

Wine consumption in Europe is falling steadily, while imports of wines are growing much faster than exports.

On current trends, excess wine production is expected to reach 15 percent of annual production by the end of this decade – something that would mean an enormous burden for EU coffers. The union already spends around half a billion euro a year just getting rid of surplus wine for which there is no market.

"We currently waste too much money...getting rid of surplus wine instead of improving our competitiveness and promoting our wines", Ms Fischer Boel argues in her paper.

Reform package

Under its reform package, the European Commission is set to push through an idea to shrink the bloc's wine industry by grubbing-up 200,000 hectares of vineyards. Each member state will be recommended to take out of production at least ten percent of its area under vines, while growers who wish to leave the sector will be offered a voluntary grubbing-up premium.

Originally, Brussels aimed at grubbing-up up to 400,000 hectares of vineyards, but the big wine-producing countries made it clear the idea would not fly.

In addition, all aids linked to surpluses will be scrapped. These include the subsidies for distilling unsold wine into industrial alcohol, storage aids, aids for the use of musts and export refunds. The EU will also no longer buy up surplus wine.

"The decision to increase production will depend on the producers' ability to sell what they produce", the commission says.

At the same time, Brussels will lift current restrictions on planting rights from 2014 and allow competitive wine producers to expand their production.

Another key stone of the commissioner's reform package is a ban on the use of sugar for enriching wine – something likely to divide the EU states into two camps. While southern producers, enjoying sunny weather for most of the year, back the idea, northern vine-dressers such as Luxembourg, Germany, Austria or Slovakia are against the ban.

The reform will be discussed by agriculture ministers in fall, with Brussels hoping for a political agreement by the end of 2007, so that the reform can enter into force in August next year.

However, EU diplomats predict a fierce battle as the reality of wine production in Europe varies greatly from one member state to another – mainly due to different climate conditions and production habits.

It is expected that the sector – employing almost two-and-a-half million people – will undergo a painful period, with some producers forced to close down.

Wine is one of the top sectors of the EU's agricultural production. France, Italy, Spain are the Europe's biggest wine producers, followed by Germany, Portugal, Hungary, Greece and Austria.