But she added that "despite our history and the quality of so many EU wines, the sector faces severe problems."

The main problem is that the EU's some 1.5 million wine producers make far more wine than there is a market for.

She explained if no steps were taken to reform the sector, Europe could eventually end up importing more wine than it exported.

Imports have grown by 10 percent a year the last ten years while exports are only slowly increasing, according to the commission.

The commission proposal aims at simplifying existing rules, making labelling clearer and encouraging better quality production.

The main parts of the reform concerns the digging up of 11.8 percent of the 3.4 million hectares of vinyards over the next five years - with €2.4 billion put aside as compensation - to get rid of excess production.

The plan also seeks to spend the around €1.3 billion yearly wine budget "more intelligently".

Earlier this month, the commission agreed to pay for France and Italy to turn 560 million litres of their excess wine into bio fuels and industrial alcohol - a practice Brussels wants to bring to an end and spend the money on promoting EU wine instead.

European imports of wine from the "new world", such as Australia, Chile, South Africa and the US, have increased 19-fold in some cases, while the newcomers have been snapping up a growing share of the world market.

The plan aims to win back market share, strengthen the reputation of European wines and boost the competitiveness of EU wine producers.

EU wine makers receive support and are "protected the in the old fashioned way," EU farm commissioner Mariann Fischer Boel said.

The European committee of wine producers (CEEV) has spoken out in support of the commission proposal.

"Whilst it is necessary to strengthen the positive features of the traditional model of the market, which works, it is also vital to review or even eliminate those aspects that prevent market orientation," said Pau Roca of the CEEV.

He said that any reform should happen together with an ambitious external trade strategy to boost wine exports.

Plan is ‘unacceptable'

However, two of Europe's biggest wine producing countries, France and Spain, have already said they will reject the commission's proposal.

With the plan barely unveiled by Ms Fischer Boel, France declared it "unacceptable".

"Abolition cannot be the essential aim of European [wine] policy," the French agriculture minister Dominique Bussereau in a statement according to French daily Le Monde.

Meanwhile, both the Spanish government and the Spanish wine sector have also said they will reject Brussels' plan.

The proposal needs the approval of the European Parliament and the 25 EU governments before coming into force, which the commission hopes will be ahead of the 2008 wine production year.