EU-27 Annual Wine Report 2009; Consumption to Fall Due to Economic Downturn(7)

POLICY
In April 2008, the EU Council of Ministers finally passed the reform of the Common Market
Organization (CMO) for wine. The reform aimed at the reduction of overproduction, phasing
out of expensive market intervention measures and the goal to make EU wine more
competitive. Most of the new rules were effective as of August 1, 2008, but a few rules
related to winemaking practices and labeling will become effective from August 1, 2009.
The European Commission claims that because EU wine producers are smaller than their
major competitors’, and their production is not adequate to the needs of large-scale
retailers, they are disadvantaged. According to the Commission, current marketing
strategies are not dynamic enough and there are too many regulatory constraints. These
handicaps have contributed to a large loss of market share for EU wines, both in the
domestic and export markets.
The reform of the CMO aims to maintain a better market balance between supply and
demand in the presence of challenges which include: increasing production and competition
from the New World, a systematic recourse to crisis distillation, an overly cautious grubbingup
policy, exaggerated use of enrichment practices, confusing labeling rules and rigid
oenological practices. The Commission is still discussing the “second path” of the wine
reform, which will lay down the rules for wine making practices, labeling and GIs.
Grubbing-up: In the wine reform the EU targeted an area of 175,000 hectares to be grubbed
up over a three year period. For 2009, the 14 eligible Member States (MS) submitted
applications for grubbing up nearly 160,000 hectares, representing 4 percent of the total EU
wine grape planted area. After applying a reduction coefficient, the actual area was scaled
down to over 73,000 hectares. The 2009 budget for Grubbing-up comes out of Pillar I
money and is set at Euro 464 million.
The allocated sums are distributed among the interested Member States (MS), which will
then prioritize how to spend that money. For example, a MS could decide to accept all
applications giving each only half of the original sum or the MS could establish priorities,
such as old farmers or small farmers, etc. In order to avoid abandonments, specific areas
can be exempted for environmental reasons from the grubbing-up scheme. The Commission
is currently waiting for MS inputs before notifying what applications they have accepted.
Planting rights: The current restrictive planting rights regime in the EU will end on January
1, 2016. Some national restrictions will remain until 2018.
Single Payment: In order to bring the sector in line with the reformed Common
Agricultural Policy (CAP), all areas formerly under vine can claim the status of areas eligible
for decoupled single payments.
National Envelopes: Each Member State has a national envelope to adapt measures to its
particular situation, to be used to finance restructuring and conversion of vineyards,
modernization of the production chain, including innovation and marketing, support for green
harvesting, and new crisis management measures. This is financed by Pillar I money.
Distillation scheme: The distillation scheme will be a gradually phased–out. The
emergency distillation scheme has a four-year phase out scheme until 2012, going from a
maximum of 20 percent of national funding to a maximum of 5 percent in the last year.
GAIN Report - E49021 Page 8 of 15