EU Unveils Ambitious Plan to Drain Wine Lakes
Date: 23-Jun-06
Country: BELGIUM
Author: Jeremy Smith
Apart from fending off competition from New World wines by focusing more on quality than quantity, the idea is to divert subsidies to discourage unwanted surpluses that usually end up being distilled into industrial alcohol or biofuel.
In a blueprint for shaking up policy on wine, a sector last reformed in 1999, EU Agriculture Commissioner Mariann Fischer Boel is keen to scrap or at least simplify many existing subsidies and curtail unnecessary production.
That won't go down well with some governments, particularly the main wine countries of southern Europe like France, Spain and Italy, which are also the world's top three producers.
"Our wines are famous all over the world. They are associated with centuries of tradition and expertise," Fischer Boel told a news conference.
"But despite all our natural advantages, we are heading for a crisis," she said, adding that falling demand and rising New World sales meant Europe might soon become a net wine importer.
"We are producing too much wine for which there is no market. Stocks are already the equivalent of a year's production. The 'wine lake' is very much a reality," she said.
A negative reaction came from France, where earlier this year thousands of winemakers took to the streets to demand help from Paris to cope with low demand and fierce competition from New World rivals.
"The reform plan...is unacceptable since it relies on a market analysis that is partially flawed, giving rise to badly suited proposals," a French Agriculture Ministry statement said.
NOT AMBITIOUS ENOUGH
The EU is the world's largest producer, consumer, exporter and importer of wine. In recent years it has lost part of its traditional export markets to cheaper wines from Australia, Chile and also the United States, and seen a surge in imports. Europe's wine industry welcomed the plan but said it should go further with cutting the sector's red tape to help EU producers compete better against their overseas rivals.
"We are very much in favour of the orientation of this paper," Pau Roca of European wine trade and industry association CEEV told reporters. "But it's not sufficiently ambitious. We need to have a more commercially aggressive policy for wine."
"Third countries take advantage of EU regulations...and offer table wines with an attractive presentation," he said. "We need to think about a reform of our labelling system."
CARROT AND STICK
For many years, hefty production subsidies skewed the balance between supply and demand and led to huge surpluses that could not be easily sold -- the EU's notorious "wine lakes".
Although that balance has narrowed since the mid-1990s as the focus has shifted to quality wine, Fischer Boel has often complained of the large amount of cash that the EU spends on distilling unwanted wine -- around half a billion euros a year.
Most of the existing distillation schemes and subsidies for private storage of wine would be scrapped, Fischer Boel said.
Her idea is to use a carrot and stick approach similar to the one she deployed in last year's sugar reform, to cut back on unnecessary production by offering cash rewards over five years for winemakers to dig up vines on land they do not need to use.
This scheme would remove some 400,000 hectares of land under vines out of the EU's existing 3.4 million hectares.
A budget of 2.4 billion euros would be made available for this over the five years, Fischer Boel said. The overall EU wine budget of some 1.3 billion euros a year is not due to change.
(additional reporting by Sybille de la Hamaide in Paris)
