ECONOMY

Facing wine glut, Europe to cut subsidies to vine growers

BRUSSELS – Europe’s wine industry faces sweeping changes over the next few years as producers are offered big cash rewards to dig up their vines and finally drain the EU’s lakes of surplus wine. Apart from fending off competition from New World wines by focusing more on quality than quantity, the idea is to divert subsidies in order 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 will not 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 and are produced in some of the continent’s most beautiful landscapes,» Fischer Boel told a news conference. «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. 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. 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. Carrot and stick 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. 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. In contrast, marketing and promotion of quality wines only eats up some 14 million euros annually. 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, with the subsidies offered probably varying by country and region. 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. Vine planting is strictly controlled in the EU, both by area and approved varieties. New plantings are not allowed until mid-2010 except under special circumstances. Fischer Boel’s idea is to extend that ban until 2013, then scrap it.