ECONOMY

EU unveils plan to stem its growing wine lake

The European Commission yesterday adopted proposals for a wide-ranging reform of the Common Market Organization for wine as of 2008, as part of a broader reform of the Common Agricultural Policy (CAP). The proposals were more moderate than those launched in June 2006, following strong reactions from producers, governments and the European Parliament, which reacted anew yesterday. The reform mainly aims to reduce excess production in the Union, which has negative repercussions on quality, and win back markets lost to competition from third countries. The focus of the proposals is on reducing the total cultivated area, through a program for uprooting about 500,000 acres – against the initially proposed 1 million acres – or 6 percent of the total area of European vineyards. A total of -1.2 billion will be paid to farmers as compensation, varying from -717 per quarter acre in the first year to -294 in the fifth year, as an incentive for its speedier implementation. The grubbing-up program will be subject to a series of environmental and social constraints, mainly aimed at eliminating those producers who operate solely for the purpose of collecting the various supports and subsidies. «We currently waste too much money – over one-third of our budget – getting rid of surplus wine instead of improving our competitiveness and promoting our wines,» said Mariann Fischer Boel, commissioner for agriculture and rural development. Under the proposals, all the inefficient market support measures – various aids for distillation, private storage aid, export refunds – would be abolished from day one,» said the Commission. The addition of sugar to enrich wine – chaptalization – would be banned, and aid for must for enrichment, introduced to compensate for the higher cost compared to chaptalization, would also be abolished. Much more money would go into promoting EU wine, particularly in third-country markets. For a five-year transitional period, planting restrictions would be kept in place and uncompetitive producers would have the opportunity to leave the sector with attractive financial support. After 2013, restrictions on planting would be lifted to allow competitive producers to expand their production if they so chose. Member states would receive a national financial package and a menu of actions to allow them to take measures best suited to the local situation. The amount available for each country will be calculated according to vine area, production and historical expenditure. More money would go into rural development to fund measures including the setting up of young wine producers and environmental protection. The EU wine sector The EU has more than 2.4 million holdings producing wine, covering 3.6 million hectares, or 2 percent of EU agricultural area. Wine production in 2006 represented 5 percent of the value of EU agricultural output. EU wine consumption is falling steadily, although sales of quality wines are increasing. Over the last 10 years, imports have grown by 10 percent per annum, while exports are only increasing slowly. Based on current trends, excess wine production will reach 15 percent of annual production by 2010/11. The EU spends around -500 million euros every year just getting rid of surplus wine for which there is no market.