AT LEAST one in ten of Europe’s vineyards must be dug up under radical European Commission proposals to help the embattled wine industry to fight back against increasingly tough competition from New World growers.

The survival plan is designed to drain the infamous wine lake, to remove restrictive winemaking and labelling practices and to encourage the production and marketing of quality wines for which there is growing demand.

Announcing the package of measures, Mariann Fischer Boel, the Agriculture Commissioner, gave a warning that without the reforms the EU, which produces and consumes 60 per cent of the world’s wine, was heading for a major crisis.

“Despite our history and the quality of so many EU wines, the sector faces severe problems. Consumption is down and exports from the New World are making huge inroads into the market. We in Europe are producing too much wine for which there is no market,” she said.

With Europeans drinking 75 million fewer litres of wine each year, excess production is forecast to reach 15 per cent of output by 2011. Stocks now are the equivalent of one year’s production: 17.8 billion litres, or 23.7 billion bottles of wine.

Further pressure is coming from New World exports, which have grown in startling fashion in 15 years. South Africa has recorded a 770 per cent increase, Australia 500 per cent, Chile 270 per cent and the United States 160 per cent.

The starting point of the Commission’s rescue plan is to use grants of €2.4 billion (£1.65 billion) to entice uneconomic growers to grub up vines and plant other crops. It is aiming to take almost one million acres of the 8.4 million acres of vines in Europe out of production over the next five years. There are 1.6 million vineyards in the EU.

At the same time Mrs Boel plans to end the €500 million a year safety net that shelters producers who cannot sell their wine. Currently, EU funds are used to store and distil the wine, turning it into ethanol for cars and factories. “This is a ridiculous way to use taxpayers’ money. We must spend our wine budget of around €1.2 billion to €1.3 billion per year more intelligently,” she said.

“Too much is going on disposing of surpluses. We should spend money to improve quality and to win new markets.”

The Commission believes that such a strategy would end surplus production, restore market balance and encourage growers to produce quality wines. At the same time, it argues that many of the traditional rules in force work against European producers. It would like them to have access to techniques, such as the use of oak chips to simulate barrel ageing, that are available to their New World competitors.

Mrs Boel was especially critical of the labelling regulations that ban any indication of the vintage and vine variety on certain table wines. Such inflexibility, she maintained, made it harder to market European wines.

“We need a more in-depth discussion on labelling. There are huge differences between New World and Old World labels. Obviously, consumers, like the more simple labels,” she said.

Europe’s wine industry gave a cautious welcome to the ideas yesterday. The Comité Européen des Enterprises Vins, the trade association for the sector representing 24 national associations, said that it “shared the thinking” behind the Commission’s package.

“We like the idea of a strong reform that will really change the vine and wine sector,” Ottavio Caggiano, the director of Federvini, the Italian wine and spirits industry association, said.

Having launched the long overdue debate on reform of one of Europe’s most visible agricultural sectors, Mrs Boel plans to table formal legislative proposals early next year. If these are accepted by EU governments and the European Parliament, the reforms could start taking effect from 2008.

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