EU scratches scars in fight to remove surplus wine

By Jeremy Smith

LUXEMBOURG (Reuters) - EU ministers reopened old divisions on Monday over how to overhaul Europe's vast wine sector, clashing over plans to dig up centuries-old vineyards and rekindling a north-south rift on using sugar in winemaking.

European Agriculture Commissioner Mariann Fischer Boel is keen to make sweeping changes to wine policy over the next few years, offering big cash incentives to producers to dig up their vines and finally drain the EU's lakes of surplus wine.

The two "hard" issues in her reform proposal -- allowing a free-for-all system for planting new vines, and banning sugar to boost alcohol content -- threaten to become deal-breakers in the final negotiations that are expected to take place in December.

"We're still at the stage where the puzzle is very complicated. All member states want everything," Portugal's Agriculture Minister Jaime Silva told a news conference.

"There are still points of great divergence between us. This reform does need to be carried out if we are to maintain our position on the world market," he said.

In their latest discussions on the reform plan, the vast majority of EU farm ministers dug in their heels against the proposed sugar ban, despite recent ideas floated by European Commission experts that were designed to help resolve the issue.

"This is rapidly becoming the most difficult part of the dossier," one EU diplomat said. "About 20 member states do not agree with the concept of banning sugar in the first place."

Fischer Boel wants to ban sugar as a winemaking practice in countries with cooler climates, such as Luxembourg and Austria, to increase alcohol content.

Even France, the world's top winemaker, blends sugar into wines in some of its northern vine areas, like Champagne.

Enriching wine with sugar costs a third as much as using concentrated grape musts -- so, to avoid unequal competition, the EU subsidizes concentrated musts.

The main country for Fischer Boel to win over is Germany, a major winemaker with an influential voice in EU decision-making.

EU wine producers may only use sugar in northern and central geographic areas, whereas it is banned in Mediterranean regions like Cyprus, Greece, Italy, Portugal, Spain and southern France.

VINE PLANTING

Another problem for EU countries is a plan to extend a ban on new vine plantings until 2013 and then scrap it. Vine planting is strictly controlled in the EU and, with very few exceptions, no new plantings are allowed until mid-2010.

That idea has incensed producers of some of Europe's most famous wines, who say the proposed reform jeopardizes centuries of wine-making tradition and expertise, particularly in smaller vineyards. After 2013, they say, quality vine areas risk being swamped with new plantings and falling prices.