EU unveils plan to shake up wine industry

Europe's wine industry, the world's largest, should see sweeping changes over the next few years as producers are offered cash…

Europe's wine industry, the world's largest, should see sweeping changes over the next few years as producers are offered cash incentives to dig up vines and so drain the EU's surplus wine lake.

Keen to fend off tough competition from New World exporters like Chile and Australia, Europe's farm chief plans to divert some of the subsidies paid to EU winemakers to get them to abandon vines and focus on quality.

The debate will begin next week when EU Agriculture Commissioner Mariann Fischer Boel publishes four broad options to shake up the industry, which was last reformed in 1999.

Her comments in recent months have made her thinking clear: many of the existing subsidies should be scrapped or simplified, and production must fall. That won't go down well with some governments, particularly the main wine countries of southern Europe like France, Spain and Italy, also the world's top three producers.

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Earlier this year, thousands of winemakers took to the streets in southern France to demand help from Paris to cope with low demand and fierce competition from New World rivals.

For many years, hefty production subsidies skewed the balance between EU wine supply and demand and led to huge surpluses that could not be easily sold.

The EU is the world's biggest producer, consumer, exporter and importer of wine. More recently, Europe has lost part of its traditional export markets to cheaper wines from countries like Australia, Chile and also the United States, and seen a surge in imports.

Ms Fischer Boel has said wine reform might prove more difficult and divisive than the 2005 sugar reform, itself a marathon negotiation over steep price cuts that faced heavy opposition from countries whose sugar industries now face collapse.

"As with sugar, a lot of people have realised that it (wine) is overdue for reform. There isn't the same level of external drivers on wine as there was on sugar - but there is a general recognition that things need to change," a diplomat said.