EU Winemakers Likely to Be Asked to Dig Up Some Vines

The reform plans are being finalized by EU Agriculture Commissioner Mariann Fischer Boel, who wants to encourage producers to abandon some of the vineyards and put the focus on better quality wines, thereby putting supply more in line with demand.

"I want to make a bold reform because just changing minor things wouldn't improve anything," Fischer Boel told reporters at an informal meeting of EU agriculture ministers.

At present, the EU produces much more wine then it sells, resulting in huge "lakes" of surplus product that Brussels spends millions of euros on to turn into undrinkable, industrial alcohol and biofuels. A key area that will be targeted will be "grubbing up," or digging up, vines by offering cash incentives for winemakers to abandon fields they don't absolutely need to use.

The EU spends about 1.3 billion euros ($1.7 billion) a year on wine subsidies. The planned reform, the first since 1999, would not change that amount. Instead, the plan would redirect subsidies and use a carrot-and-stick approach to convince European producers to rip up some of their vines, which amount for some 45 percent of the world's vineyard area.

The plan is due to be published on June 22. EU governments and the wine industry will then have an opportunity to discuss the plan's various options until the autumn, when the European Commission will draft a formal reform proposal for publication in December or January.

"Then we have the first half of 2007 to have an in-depth discussion with the member states, and I hope we can manage to finalize it before summer 2007," Fischer Boel said. "Then we need implementation, so that would be from 2008."

Supply and demand

The EU is the world's largest producer, consumer, exporter and importer of wine. But for many years, subsidies have thrown the relationship between wine supply and demand off balance, resulting in huge surpluses that could not be sold on the market. Fischer Boel has often complained of the money the EU spends on "crisis distillation," as much as half a billion euros per year ($642 million).

In the 1990s, EU winemakers began shifting their emphasis to producing higher-quality wine, which closed the gap between supply and demand somewhat, but not as much as Brussels would like to see.

"In my view, what we need to do is to spend more money on marketing wine," Luxembourg's agriculture minister, Fernand Boden, told reporters. "We have to use the money that's now spent on distillation in a more intelligent way, to promote consumption."

Although Europe is still the major player on the global wine market, it has lost some of its traditional export market in recent years to cheaper wines from countries like Australia, Chile and the United States. The EU has also begun to import more.

"A reform has to restore European wine production to be competitive with imports that we have seen from the new wine-producing countries," Fischer Boel said.

But she said she expects resistance from vintners, especially since winemaking has such deep cultural roots in many regions.