Special Report No 7/2012 ‘The reform of the common organisation of the market in wine: Progress to date’
Date: 2012-06-13
Institutions: European Court of Auditors
Subjects: EU agricultural market, agrarian reform, agricultural production policy, agricultural productivity, common organisation of markets, vineyard, viticulture, wine

EUROPEAN
COURT OF AUDITORS

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THE REFORM OF THE COMMON 
ORGANISATION OF THE MARKET IN 
WINE: PROGRESS TO DATE

EN

 
 
 
 
 
Special Report No 7 

 2012

THE REFORM OF THE COMMON 
ORGANISATION OF THE MARKET IN 
WINE: PROGRESS TO DATE

(pursuant to Article 287(4), second subparagraph, TFEU)

EUROPEAN COURT OF AUDITORS

EUROPEAN COURT OF AUDITORS
12, rue Alcide De Gasperi
1615 Luxembourg
LUXEMBOURG

Tel. +352 4398-1
Fax +352 4398-46410
E-mail: eca-info@eca.europa.eu
Internet: http://eca.europa.eu

Special Report No 7 

 2012

A great deal of additional information on the European Union is available on the Internet.
It can be accessed through the Europa server (http://europa.eu).

Cataloguing data can be found at the end of this publication.
Luxembourg: Publications Office of the European Union, 2012

ISBN 978-92-9237-558-4
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© European Union, 2012
Reproduction is authorised provided the source is acknowledged.

Printed in Luxembourg

Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

3

CONTENTS

Paragraph

GLOSSARY

ABBREVIATIONS

I–IX	

SUMMARY

1–8	

1–2	

3–5	

6–8	

INTRODUCTION

DESCRIPTION	OF	THE	AUDIT	AREA

OVERVIEW	OF	EU	WINE	SECTOR	AT	THE	TIME	OF	THE	REFORM

THE	OBJECTIVES	OF	THE	REFORM

9–10	

AUDIT	OBJECTIVE,	SCOPE	AND	APPROACH

11–50	

OBSERVATIONS

11–18	

	THE	DESIGN	OF	THE	REFORM

11–12	

IN	GENERAL,	AN	EXTENSIVE	REVIEW	UNDERTAKEN	BY	THE	COMMISSION

13–14	

HOWEVER,	AN	IMPORTANT	ISSUE	NOT	SUFFICIENTLY	RESEARCHED	BY	THE	COMMISSION

15–17	

AND	SOME	INITIAL	COMMISSION	PROPOSALS	WERE	NOT	ADOPTED		

18	

LIMITED	MEASURES	TO	ADDRESS	SHORT	TERM	PRODUCTION	FLUCTUATIONS

19–50	

THE	IMPACT	OF	THE	GRUBBING‑UP	AND	RESTRUCTURING	MEASURES

19–31	

THE	GRUBBING‑UP	SCHEME

32–43	

RESTRUCTURING	AND	CONVERSION	MEASURE

44–50	

THE	IMPLEMENTATION	OF	NATIONAL	ENVELOPES	AND	CONTROL	SYSTEMS	AT	NATIONAL	LEVEL

51–61	

CONCLUSIONS	AND	RECOMMENDATIONS

51–57	

CONCLUSIONS

58–61	

RECOMMENDATIONS

REPLY	OF	THE	COMMISSION

Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

	
	
GLOSSARY

4

By‑product	distillation	measure: Support granted for the voluntary or obligatory distillation of by-products 
of wine making (grape marc and wine lees) which has been carried out in accordance with the conditions laid 
down in point D of Annex XVb of Regulation (EC) No 1234/2007. 

Chaptalisation: The process of adding sugar to unfermented grape must in order to increase the alcohol 
content after fermentation.

Concentrated	grape	must: Concentrated grape must is uncaramelised grape must which is obtained by par-
tial dehydration of grape must carried out by any authorised method other than by direct heat.

Concentrated	must	(rectified): Rectified concentrated grape must is the liquid uncaramelised product which 
is obtained by partial dehydration of grape must carried out by any authorised method other than direct heat; 
and has undergone authorised treatment for de-acidification and elimination of constituents other than sugar.

Crisis	distillation	measure: Support granted until 31 July 2012 for voluntary or obligatory distillation of sur-
plus wine decided upon by Member States in justified cases of crisis so as to reduce or eliminate the surplus 
and at the same time ensure supply continuity from one harvest to the next.

Enrichment: The increase in natural alcoholic strength by volume of fresh grapes, grape must or wine still in 
fermentation by adding sucrose, concentrated grape must or rectified concentrated grape must or by partial 
concentration.

Green	harvesting	measure: Green harvesting means the total destruction or removal of grape bunches while 
still in their immature stage, thereby reducing the yield of the relevant area to zero. Support for green harvest-
ing may be granted as compensation in the form of a flat rate payment per hectare to be determined by the 
Member State concerned.

Grubbing‑up	premium: Support granted to vine growers for the permanent withdrawal of all vines in a parcel 
or holding.

Harvest	insurance	measure: Support aimed at contributing to the safeguarding of producers’ incomes where 
these are affected by natural disasters, adverse climatic events, diseases or pest infestations.

Investments	measure: Support granted for tangible or intangible investments in processing facilities, winery 
infrastructure and marketing of wine which improve the overall performance of the enterprise and concern 
one or more of the following: (a) the production or marketing of products referred to in Annex XIb of Regu-
lation (EC) No 1234/2007; (b) the development of new products, processes and technologies related to the 
products referred to in Annex XIb.

Mutual	funds	measure: Mutual funds provide assistance to producers seeking to insure themselves against 
market fluctuations. Community support for the setting-up of mutual funds may be granted in the form of 
temporary and degressive aid to cover the administrative costs of the funds.

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Planting	rights: Within the EU, the planting of vines of wine grape varieties is prohibited, except if that plant-
ing is covered by planting rights — the right, granted in hectares, that entitles vine growers to plant vines. 
These rights can take the form of (i) individual replanting rights, granted to a farmer following the grubbing-up 
of previously existing vines; or (ii) new planting rights and rights from a national or regional reserve managed 
by the Member State, not yet allocated to specific growers. Additional requirements of the planting right sys-
tem are described in articles 85f through 85n of Regulation No (EC) 1234/2007.

Potable	alcohol	distillation	measure: Support granted, in the form of per-hectare aid, until 31 July 2012 to 
producers, for wine which is distilled into potable alcohol.

Promotion	measure: Support for information or promotion measures concerning Community wines. The pro-
motion measure relates to wines with a Protected Designation of Origin or Geographical Indication, or wines 
with an indication of the wine grape variety. This measure may consist only of: (a) public relations, promo-
tional or advertisement measures, (b) participation at events, fairs or exhibitions of international importance, 
(c) information campaigns, (d) studies of new markets, necessary for the expansion of market outlets; and (e) 
studies to evaluate the results of the promotional and information measures. The Community contribution to 
promotion activities shall not exceed 50 % of the eligible expenditure.

Restructuring	and	conversion	of	vineyards	measure: Support for restructuring and conversion of vine-
yards may only cover one or more of the following activities: (a) varietal conversion, including by means of 
grafting-on; (b) relocation of vineyards; (c) improvements to vineyard management techniques. The normal 
renewal of vineyards which have come to the end of their natural life shall not be considered as a restructur-
ing and conversion activity. Support for restructuring and conversion of vineyards may only take the following 
forms: (a) compensation of producers for the loss of revenue due to the implementation of the measure; (b) 
contribution to the costs of restructuring and conversion.

Single	Payment	Scheme	(SPS): An aid scheme which replaced most of the pre-existing direct aid payments 
and in which aid is decoupled from any obligation to produce. Instead, full payment of aid is subject to the 
condition that farmers keep all their land in good agricultural and environmental condition (GAEC) and respect 
statutory management requirements (SMRs) — the ‘cross-compliance’ requirement.

Usable	production: Production of must intended for wine processing and equivalent to total production 
deducted of uses other than wine, in particular, of must intended solely for grape juice and losses due to 
evaporation.

Use	of	concentrated	grape	must: Support granted until 31 July 2012 to wine producers who use concen-
trated grape must, including rectified concentrated grape must, to increase the natural alcoholic strength of 
products in accordance with the conditions laid down in Annex XVa of Regulation (EC) No 1234/2007.

Vineyard	inventory: A database containing information on the wine production potential of each Member 
State.

Wine	 year: The  production  year  for  wine  products  (described  in  par t  XII  of  Annex  I  of  Regulation  (EC) 
No 1234/2007. It begins on 1 August each year and ends on 31 July of the following year. 

Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

ABBREVIATIONS

6

CAP: Common agricultural policy

COM: Common organisation of the market

EAFRD: European Agricultural Fund for Rural Development

EAGF: European Agricultural Guarantee Fund

EU‑27: European Union of 27 Member States

ha: Hectare

hl: Hectolitre

SPS: Single payment scheme

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Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

7

SUMMARY

I.
The European Union (EU) is the world’s biggest wine 
producer. With 3,5 million ha of vines, the EU produced 
during wine year 2007/08 approximately 160 million hl 
of wine. This accounts for around 60 % of the world’s 
wine production. Wine production is estimated to rep-
resent approximately 5 % of the EU agricultural output. 
France, Spain and Italy are the largest wine producing 
Member States.

II.
In 2008, the Council introduced a reform of the com-
mon organisation of the market in wine aimed essen-
tially at improving the competitiveness of EU wine 
producers and balancing supply and demand in the 
wine sector, this in a context of a long persisting struc-
tural surplus of supply and falling demand. The main 
financial instruments of this reform included a tem-
porary grubbing-up scheme and the setting up of 
national support programmes: a specific budget made 
available for each Member State, which can choose 
the measures (among 11 available) best adapted to 
its particular situation. 

III.
The  main  objective  of  the  audit  was  to  assess  the 
progress achieved to date as regards one of the main 
objectives  of  the  reform:  improving  the  balance 
between supply and demand. The audit focussed on 
the ‘grubbing-up’ and ‘restructuring and conversion of 
vineyards’ measures, the two largest areas of spending. 

IV.
Faced with an overall (EU-27) long standing situation 
of structural surplus and loss of international com-
petitiveness, the reform created or redesigned tools 
to tackle the main problems in the wine market. It is 
too early to assess the effectiveness of the measures, 
other than grubbing-up and restructuring, introduced 
with the setting-up of national envelopes which take 
into account the diversity of market circumstances at 
the level of each Member State. 

V.
For the grubbing-up measure, which was an impor-
tant tool to balance supply and demand, ostensibly by 
eliminating or at least significantly reducing the market 
imbalance, the audit found that, the aid rates were set 
at too high levels in the first two years of the scheme. 
Each year, the demand for the measure exceeded the 
target even when the rates were maintained at their 
previous levels in the third year. The Court considers 
that, in these circumstances, the scheme could have 
been more efficient — since it is likely that smaller 
increases or even keeping the aid rates at their pre-
vious levels would have made it possible to achieve 
more significant results with the resources made avail-
able or the same results with less resources.

VI.
However  the  expected  volume  reduction  did  not 
materialise, because other measures did not have the 
impact foreseen. The target of 175 000 ha grubbing-up 
was not sufficient to correct the existing market imbal-
ance. It was based on criteria which did not materialise 
as, for example, the discontinuation of enrichment with 
sucrose, as well as the impact of other measures such 
as green harvesting and promotion. 

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8

SUMMARY

VII.
As regards the restructuring and conversion measure, 
which  is  now  made  available  to  Member  States  as 
part of the national envelopes, a significant impact 
has been achieved for large areas of vineyards across 
Europe. The measure facilitates and therefore acceler-
ates the process of qualitative adaptation of supply 
to demand and the modernisation and rationalisation 
of vineyards. However, the Member States have used 
the flexibility accorded to them in implementing the 
measure to select a wide range of operations to be 
covered as well as very different aid rates. In addi-
tion, increases in yields which result from restructuring 
without any discernible impact on overall consump-
tion partially offset the effects of grubbing-up in Spain 
and Italy.

VIII.
Despite the Commission’s preparatory work being, for 
the most part, extensive in scope and depth, some 
of its initial proposals failed to materialise, whilst the 
planned liberalisation of planting rights lacked suf-
ficient research. 

IX.
O n   t h e   b a s i s   o f   t h e s e   o b s e r v a t i o n s,   t h e   Co u r t 
recommends:

 — The  Commission  should  establish  an  estimate 
of the balance between supply and demand in 
the wine sector based on updated data, includ-
ing the planned liberalisation of planting rights. 
On the basis of that estimate it should determine 
whether any measures are necessary to address 
possible imbalances.

 — Should further grubbing-up measures be consid-
ered necessary the grubbing-up of modernised 
vineyards should be avoided by establishing ad-
ditional eligibility criteria linked to the vineyard 
itself and not only to the farmer.

 — Given the wide range of operations defined by 
Member States in implementing the restructur-
ing  measure,  the  Commission  should  establish 
a more precise definition of eligible restructuring 
operations, in particular those allowed under the 
regulator y  heading ‘Improvements  to  vineyard 
management techniques’.

 — In order to avoid overcompensation in those cases 
where payments to beneficiaries are based on flat 
rates per hectare, the Commission should require 
Member States to check, at least on a sample ba-
sis, that the EU subsidy does not exceed the eli-
gible percentage of the actual costs.

 — While on the one hand the EU finances the grub-
bing-up measure in order to reduce the surplus of 
wine produced, on the other hand the restructur-
ing and conversion measure leads to increases in 
vineyard yields and therefore volumes produced 
which go against the objective of balancing sup-
ply  and  demand  without  securing  new  market 
outlets; the Commission should therefore ensure 
that an appropriate policy mix is available to ad-
dress this tension.

 — As regards statistical data, the Commission should 
define  key  per formance  indicators,  relevant  to 
the objectives of the reform, that could provide 
a timely measurement of its success.

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Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

9

INTRODUCTION

DESCRIPTION	OF	THE	AUDIT	AREA

1.	

The European Union is the world’s biggest wine producer. With 3,5 mil-
lion ha of vines, the EU produced during wine year 2007/08 approxi-
mately  160  million  hl  of  wine 1. This  accounts  for  around  60 %  of  the 
world’s wine production and represents about 5 % of the EU agricultural 
output. France, Spain and Italy are the largest wine producing Member 
States.

1  European Commission/
Agriculture and Rural 
Development DG, vineyard 
inventory and Eurostat 
— supply balance sheet, 
respectively.

GRAPH	1

VINEYARD	HARVESTED	AREA	AND	USABLE	WINE	PRODUCTION	
(AVERAGE	FROM	2003/04	UNTIL	2007/08) 1

)
a
h
0
0
0
1
(
a
e
r
a
d
e
t
s
e
v
r
a
H

1 200

1 000

800

600

400

200

0

)
l

h
0
0
0
1
(
n
o
i
t
c
u
d
o
r
p
e
l

b
a
s
U

60 000

50 000

40 000

30 000

20 000

10 000

0

Bulgaria Germany Greece

Spain

France

Italy

Hungary Austria Portugal Romania

Harvested Area 

Usable Production 

1  Only Member States with an average production over 1 million hl are shown in this graph. Values shown for production refer
to a smoothed average which excludes the highest and lowest values for each country during the period in question.

Source: Eurostat, supply balance sheet and crops products annual statistics.

Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

 
 
 
 
 
 
 
 
2.	

3.	

4.	

10

The Common Organisation of the Market (COM) in wine was created in 
1962. At that time, there were only a few legislative instruments regulat-
ing the wine market. The COM then supported production with virtually 
guaranteed sales through intervention measures such as distillation and 
export refunds, which resulted in a structural surplus. From 1976 a ban 
on new planting and the obligation to distil the surplus production were 
introduced and towards the end of the 1980s financial incentives for 
grubbing-up vineyards were increased. The 1999 reform of the COM for 
wine aimed at achieving a better balance between supply and demand 
in the market by financing the restructuring of a large part of the total 
vineyard area of the EU and reinforcing intervention measures such as 
export refunds and support for distillation and storage. Nothwithstand-
ing the reinforced intervention measures, a balance between supply and 
demand was not achieved, as those measures effectively maintained 
a subsidised outlet for the wine surplus.

2  Because total production 
may vary significantly from 
one year to the other as 
a result of climatic conditions, 
structural surplus is best 
measured using averages of 
more than one single year. 
The estimate of 14,5 million hl 
is based on the Commission’s 
analysis for the period 
1999–03 and the Court’s 
own analysis does not show 
material differences.

OVERVIEW	OF	EU	WINE	SECTOR	AT	THE	TIME	OF	THE	
REFORM

This structural surplus of production has been a constant feature of the 
European wine market over the last decades and has been repeatedly 
mentioned as a key concern in the various reforms of the COM. In 2005, 
when the Commission initiated its preparatory work for the latest reform 
of the COM, accumulated wine stocks represented the equivalent of one 
year of production and the structural surplus was estimated at approxi-
mately 14,5 million hl2, equivalent to 8,5 % of the total production. The 
Commission estimated that the subsidised potable alcohol distillation 
scheme increased this surplus by a further 4 million hl to 18,5 million hl. 
The effect of this excess of supply over demand was to put a downward 
pressure on wine prices at producer level.

On the demand side, overall wine consumption in the EU decreased 
in the 20 years to 2009. This is largely due to a significant fall in con-
sumption in the main producing Member States (Graph 2). While some 
Member States have increased their consumption of wine, this increased 
demand has largely been met by imports, the levels of which have grown 
until 2007 and are stable since then (Graph 3), denoting an overall loss 
of competitiveness of the European wine production. As the Commis-
sion noted in 2006, ‘the positive evolution of wine consumption in non-
wine-producing Member States has not led to a benefit for the sales 
of EU wines, since the additional volumes consumed almost entirely 
corresponded  to  an  increase  in  the  consumption  of  wines  imported 
from third countries’. At the time of the reform, exports had risen, but at 
a lower rate than that of imports. 

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GRAPH	2

WINE	CONSUMPTION	PER	CAPITA	IN	SELECTED	MEMBER	STATES	

s
e
r
t
i
L

70  

60  

50  

40  

30  

20  

10  

0  

1
9
/
0
9
9
1

2
9
/
1
9
9
1

3
9
/
2
9
9
1

4
9
/
3
9
9
1

5
9
/
4
9
9
1

6
9
/
5
9
9
1

7
9
/
6
9
9
1

8
9
/
7
9
9
1

9
9
/
8
9
9
1

0
0
/
9
9
9
1

1
0
/
0
0
0
2

2
0
/
1
0
0
2

3
0
/
2
0
0
2

4
0
/
3
0
0
2

5
0
/
4
0
0
2

6
0
/
5
0
0
2

7
0
/
6
0
0
2

8
0
/
7
0
0
2

9
0
/
8
0
0
2

0
1
/
9
0
0
2

1
1
1
/
0
1
0
2

Germany 

Spain

France

Italy

United Kingdom

1  Data concerning wine year 2010/11 are provisional.

Source: Eurostat, wine supply balance sheet.

GRAPH	3

EXTRA‑EU	WINE	TRADE

25 000  

20 000  

l

h
0
0
0
1

15 000  

10 000  

5 000  

0  

1
0
/
0
0
0
2

2
0
/
1
0
0
2

3
0
/
2
0
0
2

4
0
/
3
0
0
2

5
0
/
4
0
0
2

6
0
/
5
0
0
2

7
0
/
6
0
0
2

8
0
/
7
0
0
2

9
0
/
8
0
0
2

0
1
/
9
0
0
2

1
1
1
/
0
1
0
2

Imports EU-27

Exports EU-27

1  Data concerning wine year 2010/11 are provisional.

Source: Eurostat, wine supply balance sheet. 

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12

3  Special Report No 4/87 
(OJ C 297, 6.11.1987, p. 14).

4  The Court’s annual reports 
concerning the financial 
years 1991 (OJ C 330, 
15.12.1992, p. 1), 1993 
(OJ C 327, 24.11.1994, p. 1), 
1996 (OJ C 348, 18.11.1997, 
p. 1) and 1999 (OJ C 342, 
1.12.2000, p. 1) contain 
specific references to these 
issues.

5  COM(2006) 319 final, 
22 June 2006.

6  Recital 5 of Council 
Regulation (EC) No 479/2008 
of 29 April 2008 on the 
common organisation 
of the market in wine, 
amending Regulations 
(EC) No 1493/1999, 
(EC) No 1782/2003, 
(EC) No 1290/2005, 
(EC) No 3/2008 and repealing 
Regulations (EEC) No 2392/86 
and (EC) No 1493/1999 
(OJ L 148, 6.6.2008, p. 1).

5.	

6.	

The last special report issued by the Court on the COM wine was pub-
lished in 1987 and covered essentially the Community’s wine distillation 
measures 3. Already at that time it was clear that supply was exceed-
ing demand, owing to a combination of increasing yields (which offset 
measures aimed at reducing the area under vines) and falling demand. 
Besides finding shortcomings both in the governing regulations and in 
their implementation at Member State level, the Court concluded that 
the distillation measures were actually contributing to the structural 
surplus of supply by providing an assured outlet at excessively attractive 
prices. In fact, the main effect of the distillation measures was to transfer 
the problem of structural surplus from the wine to the alcohol market. 
The adverse effects of the distillation measures, together with the wider 
problems of persistent imbalances in the wine market and the relative 
ineffectiveness of the grubbing-up measure (partly due to an offsetting 
effect from replanting support schemes), were also noted by the Court 
in Annual Reports of subsequent years4.

THE	OBJECTIVES	OF	THE	REFORM

The primary reason for reforming cited by the Commission in its 2006 
communication to the Council and the European Parliament — ‘Towards 
a sustainable European wine sector’5 — was the growing imbalance be-
tween supply and demand. As additional reasons, the Commission noted 
the complexity of the existing regulatory framework; the increased use 
of crisis distillation, which was becoming a regular practice; decreasing 
consumption; increasing competition from third countries; the limited 
success of planting rights in controlling the production potential; and 
the negative effects of planting restrictions in the process of rationalis-
ing the structure of holdings. 

7.	

In  the  light  of  those  problems,  the  objectives  of  the  reform  were 
therefore6: 

 Ū to create a wine regime that operates through clear, simple and 

effective rules that balance supply and demand;

 Ū to increase the competitiveness of the Community’s wine producers; 

 Ū to strengthen the reputation of Community quality wine as the 

best in the world; 

 Ū to recover old markets and win new ones in the Community and 

worldwide; 

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13

BOX	1

THE	MAIN	FEATURES	OF	THE	REFORMED	COM

The main financial instruments, supported by an annual budget of 1,4 billion euro, are:

 ο Voluntary grubbing-up of vineyards, limited to a period of 3 years.

 ο National financial envelopes: a specific budget is made available for each Member State which can choose 

the measures (among 11 available7) best adapted to its specific situation.

 ο Rural development and environmental protection in wine-producing areas.

Other features of the wine reform include:

 ο Immediate withdrawal of intervention measures such as export refunds and storage and the gradual with-
drawal of other intervention measures (e.g. crisis distillation) which should end by 2012. The latter measures 
are included in the national envelopes.

 ο The extension of the planting rights regime until the end of 2015 with a possibility for Member States to 

extend the regime to the end of 2018.

 ο The adaptation of wine-making practices in line with those established by the International Organisation 

of Vine and Wine (OIV ).

 ο New wine classification rules, according to three categories (‘Protected Designation of Origin’, ‘Protected 

Geographical Indication’ and other wines including varietal wines).

 ο Simpler labelling rules.

 ο Cross-compliance requirements (wine growers now have to respect the good agricultural and environmental 

conditions defined in Council Regulation (EC) No 73/2009).

7  Article 103m of Council Regulation (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets 
and on specific provisions for certain agricultural products (Single CMO Regulation) (OJ L 299, 16.11.2007, p. 1) lists the measures available 
to Member States: single payment scheme; promotion; restructuring and conversion of vineyards; green harvesting; mutual funds; harvest 
insurance; investments; by-product distillation; potable alcohol distillation; crisis distillation; and use of concentrated grape must.

wine bottling process

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14

 Ū to create a wine regime that preserves the best traditions of Com-
munity wine production, reinforcing the social fabric of many rural 
areas; and 

 Ū to ensure that all production respects the environment.

8.	

Council Regulation (EC) No 479/2008 on the new COM in wine came into 
force on 1 August 2008 and provided the overall framework for a wine 
sector reform. In August 2009, that regulation was repealed 8 and the 
wine COM was integrated into the single COM established by Council 
Regulation (EC) No 1234/2007. 

8  Council Regulation (EC) 
No 491/2009 of 25 May 2009 
amending Regulation (EC) 
No 1234/2007 establishing 
a common organisation of 
agricultural markets and on 
specific provisions for certain 
agricultural products (Single 
CMO Regulation) (OJ L 154, 
17.6.2009, p. 1).

restructured vineyard in spain

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AUDIT OBJECTIVE, SCOPE AND APPROACH

15

9  The EAGF financial year 
n runs from 16 October n-1 to 
15 October n.

9.	

10. 

The audit aimed primarily at assessing the progress achieved to date as 
regards particularly one of the main objectives of the reform: improv-
ing the balance between supply and demand. The audit focused on the 
‘grubbing-up’ and ‘restructuring and conversion’ measures, because they 
are the two largest areas of spending and because they are crucial to the 
achievement of the objective of improving the balance between supply 
and demand. The grubbing-up measure is designed to reduce supply 
and one target of the restructuring and conversion measure is to adapt 
supply to demand. Although a general review of the design of other 
measures was carried out, the audit did not assess their effectiveness, 
as they have only been implemented from 2009 onwards. At the time of 
execution of the audit such an assessment would have been premature.

The Court conducted audit missions to Germany, Spain, France, Italy and 
Romania and to the Commission, to interview the officials responsible for 
the reform preparation, implementation and monitoring. In the Member 
States selected, the audit included the review and analysis of national 
legislation, statistical data and internal procedures on the basis of sam-
ples of transactions, as well as audits on the spot to beneficiaries — the 
wine growers. The transactions reviewed were sampled from expenditure 
made during the financial year 20099 — the first year of implementation 
of the reform.

restructured vineyard in romania

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OBSERVATIONS

16

THE	DESIGN	OF	THE	REFORM	

IN	GENERAL,	AN	EXTENSIVE	REVIEW	UNDERTAKEN	BY	THE	
COMMISSION

11. 

In preparing the reform, the Commission undertook a wide-ranging re-
view of the wine sector. Between 2005 and 2008, it undertook an ex post 
evaluation of the pre-existing regime, consultation with stakeholders, an 
impact assessment and research on specific aspects of the wine sector. 

BOX	2

USE	OF	‘CRISIS	DISTILLATION’	AND	‘STORAGE’,	QUANTITIES	DISTILLED	AND	EU	
EXPENDITURE	DURING	2000–08

Use of crisis distillation

Storage of wine and grape must

Wine year

Quantities distilled (hl)

Expenditure (euro)

Financial year

Expenditure (euro)

2000/01

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

Total

5 923 000

6 679 000

-

-

7 058 000

4 880 000

-

-

120 400 000

165 160 000

-

-

175 053 000

120 300 000

-

-

24 540 000

580 913 000

2001

2002

2003

2004

2005

2006

2007

2008

Total

61 706 018

68 534 023

53 182 036

50 206 010

69 571 712

90 332 117

85 452 311

73 821 269

552 805 497

Source: European Commission, Agriculture and Rural 
Development DG.

Source: European Commission, general budget.

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12. 

In addition to the grubbing-up and restructuring measures, which are 
covered in detail in the following sections, the reform included the fol-
lowing important features:

(a)  The creation of national envelopes which means that, given the 
diversity of the wine sector, Member States10 are able to choose 
the measures best adapted to their specific situation including the 
abovementioned restructuring measures. Indeed, wine is not an 
undifferentiated commodity: there is an important product diver-
sity as well as a different market situation in the different Member 
States. Adaptable national envelopes can be an appropriate re-
sponse to these diverse national market circumstances.

(b)  The gradual end of intervention measures such as storage and dis-
tillation, which were being used systematically, as shown in Box 2, 
is designed to eliminate alternative, non-market based outlets for 
wine production.

10  The wine sector in 
each Member State varies 
significantly, not only in terms 
of the diversity of products, 
but also in terms of the 
structure of production and 
the balance or imbalance 
between national production 
and consumption.

11  Article 85g(5) of Regulation 
(EC) No 1234/2007.

12  This was in contrast with 
what happened in other 
markets subject to significant 
changes e.g. the milk market 
after the abolition of the milk 
quota regime.

13. 

14. 

HOWEVER,	AN	IMPORTANT	ISSUE	NOT	SUFFICIENTLY	RESEARCHED	BY	
THE	COMMISSION

THE	END	OF	THE	PLANTING	RIGHTS	REGIME	

One of the key elements of the COM in wine is the planting rights regime, 
in force since 1976, which significantly restricts the  planting of  new 
vineyards. Although the COM in 1999 planned that the regime should 
end in 2010, the reform of 2008 maintains it until the end of 2015, and 
allows the Member States to continue enforcing it in all or part of their 
territory until the end of 201811.

In internal memoranda, the Commission briefly analysed the impact of 
the abolition of planting rights and concluded that there was no risk of 
an increase of plantations subsequent to the end of the planting rights 
regime, considering that after the end of the market support mecha-
nisms, ‘producers will only plant if they are sure of a commercial outlet’. 
However, the Commission did not carry out an in-depth impact assess-
ment of the potential consequences — risks and opportunities — arising 
form the extension of the planting rights regime12. 

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18

15. 

16. 

17. 

AND	SOME	INITIAL	COMMISSION	PROPOSALS	WERE	NOT	ADOPTED

THE	DISTILLATION	FOR	POTABLE	ALCOHOL	SCHEME

Earlier  versions  of  the  COM,  included  support  for  wine  distilled  into 
potable alcohol — which can then be used in drinks such as port wine 
or brandy. Such support was calculated on the basis of the volume of 
wine actually distilled. During the preparation stage of the latest COM, 
the Commission considered both a reduction in the aid for distillation 
and its termination. Behind these alternatives was the concern that the 
previous aid rates for distillation were too attractive compared to wine 
market prices, thereby artificially promoting the production of low qual-
ity wine and hindering the restructuring of the sector. In the end, the 
Council decided to maintain the scheme during a limited transitional 
period of 4 years, but in the form of a per-hectare aid (independent from 
the volume of wine distilled), to be paid to producers whose production 
is used for wine distillates. While this decision has a positive short-term 
effect on the balance in the wine market, it does not address the nega-
tive effects of the scheme. 

ENRICHMENT

In years when weather is unfavourable, enrichment may be necessary to 
produce wine with the required alcoholic strength. In Europe, an aver-
age of 27 million hl of wine are enriched every year using concentrated 
must or rectified concentrated must and 28 million hl using sucrose (the 
latter process is also known as ‘chaptalisation’). The total of 55 million hl 
corresponds to 30 % of the total EU wine production. Enrichment on this 
scale uses 5 million hl of must and 90 000 tonnes of sucrose.

The Commission initially proposed to abolish aid for the use of concen-
trated must and to ban the use of sucrose. Shifting from enrichment 
with sugar to rectified concentrated must would not pose significant 
technical difficulties, but would increase production costs, such as the 
costs of transporting the rectified concentrated must. The Commission 
envisaged that this would have led to savings of 130 million euro per 
year and would have helped balance the market (4,4 million hl through 
the replacement of sucrose with rectified concentrated must). How-
ever, the proposal faced strong opposition from some Member States 
which argued that it would negatively affect the competitiveness of 
the producers concerned and force a change in traditional practices 
in regions where no structural surpluses exist. The Council decided to 
abolish the aid for the use of concentrated must as of wine year 2012/13 
while continuing to allow the use of sucrose in some regions (as defined 
in Annex XVa of Regulation (EC) No 1234/2007). Thus, the theoretical 
4,4 million hl reduction could not be achieved.

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18. 

19. 

LIMITED	MEASURES	TO	ADDRESS	SHORT	TERM	PRODUCTION	
FLUCTUATIONS

Historic records have shown that total wine production can vary be -
tween two consecutive years by more than 15 %13. The reform terminated 
those market support mechanisms (such as storage, distillation or export 
refunds) that helped wine producers to deal with variable production 
levels. The two measures introduced by the reform with the objective 
of minimising the negative effects of such variability (green-harvesting 
and mutual funds) either have so far had a limited take-up or are limited 
in scope14. Green-harvesting, which is the measure offering the great-
est potential to address harvest variations, has the additional inherent 
shortcoming of being limited to a period between June and July15 dur-
ing which farmers may not yet have a clear picture of the year’s harvest. 
Thus, this new measure cannot have a substantial impact on the wine 
balance.

THE	IMPACT	OF	THE	GRUBBING‑UP	AND	
RESTRUCTURING	MEASURES

THE	GRUBBING‑UP	SCHEME	

A	WELL‑SUITED	INSTRUMENT

The transitory ‘grubbing-up scheme’ is a major feature of the reformed 
COM designed to provide a quick and permanent response to the struc-
tural surplus through a reduction in production. In essence, it provides 
compensation to farmers who opt to permanently dig up their vines and 
lose the corresponding planting rights. By supporting the permanent 
withdrawal of vineyards, the grubbing-up scheme is a more effective 
instrument to deal with a structural surplus of wine than the previous 
intervention measures, such as the storage and distillation measures, 
which simply provided a temporary solution to a structural problem. In 
these circumstances, the success of the grubbing-up scheme is essential 
to achieving a structural balance between supply and demand in the 
wine market.

13  Wine usable production 
reached 168 million hl in 2003 
but rose to 194 million hl 
in 2004, i.e. an additional 
26 million hl of wine between 
2003 and 2004.

14  During financial year 
2009, only Slovenia used 
green-harvesting, for an 
amount of 131 000 euro, or 
3,7 % of its national envelope. 
The take up increased in 
2010 (16,8 million euro) but 
is still limited to Italy, Slovenia 
and Cyprus. As regards 
mutual funds, there was 
no expenditure under that 
measure in both financial 
years 2009 and 2010, and 
none is foreseen until the end 
of the programming period, 
2013.

15  Article 12 of Commission 
Regulation (EC) No 555/2008 
of 27 June 2008 laying 
down detailed rules for 
implementing Council 
Regulation (EC) No 479/2008 
on the common organisation 
of the market in wine as 
regards support programmes, 
trade with third countries, 
production potential and on 
controls in the wine sector 
(OJ L 170, 30.6.2008, p. 1) — 
Claims must be submitted 
between 15 April and 31 May 
whilst the actual harvest and 
final control must take place 
between 15 June and 31 July.

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20. 

Although a similar scheme already existed in previous versions of the 
COM (‘abandonment premium’), the scope of the measure was enlarged, 
in  particular  because  the  option  previously  given  to  Member  States 
to decide whether or not to apply the measure in their territory was 
removed. Between 1996 and 2008 access to this measure by farmers 
was dependent on national rules, with the result that the area actu-
ally grubbed-up during that period was insignificant in most Member 
States16. With the latest reform, each individual farmer is free to apply 
for the measure, extending its potential scope to all EU vineyards17. 

21. 

Regulation (EC) No 479/2008 established the budget available for the 
grubbing-up measure at 1 074 million euro, to be used throughout its 
3-year application period as follows: 

Wine year

Budget available

2008/09

2009/10

2010/11

464

334

276

(million euro)

Total

1 074

BUT	AID	RATES	SET	AT	TOO	HIGH	LEVELS	AND	DEMAND	FOR	THE	MEASURE	EXCEEDED	
THE	TARGET	EVEN	WHEN	THE	RATES	WERE	MAINTAINED	AT	THEIR	PREVIOUS	LEVELS

22. 

The  Commission  decided,  without  evident  justification,  to  increase 
the rate of aid by 20 % in the first of the 3 years of application of the 
scheme and by 10 % on the second, while the rates were maintained at 
their previous levels for the third and last year18. This was based on the 
premise that premium levels should cover at least 5 years of farmers’ 
profit margin. However, areas of the EU vineyard inventory accounting 
for substantial grubbing-up activity19 were already meeting that criterion 
prior to the reform. The Court estimates that these increases in aid rates 
cost the EAGF approximately 100 million euro, or 10 % of the total cost 
of the grubbing-up scheme. 

20

16  In the period prior to 
the latest COM reform, 
in particular between 
1988 and 1996, more than 
500 000 ha of vineyards have 
been grubbed up, mostly in 
Spain, Italy and France, the 
biggest producing Member 
States. This corresponds to 
a reduction of more than 
1/8 of the EU-12 vineyard 
area existing in 1988 — 
approximately 4 million ha. 
After 1996, however, 
Member States were given 
the option to restrict the 
application of the measure 
in their respective territories, 
which resulted in the area 
grubbed-up after that date 
being significantly reduced 
(between 1997 and 2008 
less than 30 000 ha has been 
grubbed up, principally in 
France).

17  However, Member States 
did retain the possibility 
of limiting the impact of 
grubbing-up in certain 
regions or once the area 
actually grubbed-up 
reached certain pre-defined 
thresholds. 

18  Aid rates per hectare in 
the grubbing-up scheme are 
calculated as a function of the 
historical yield of the holding 
concerned, although certain 
derogations are foreseen 
in case that information 
is not available. They vary 
between 1 450 euro/ha and 
12 300 euro/ha for the lowest 
and highest yield categories 
respectively. However, these 
rates were increased by 
20 % during the first year of 
application of the scheme and 
by 10 % during the second.

19  The Commission’s 
own analysis shows that 
for Castilla–La Mancha 
(where 44 % of the overall 
grubbing up during the 
3-year campaign took 
place) the previous aid 
rates were already covering 
6,5 years of margin, while 
Languedoc-Roussillon (where 
10 % of the overall grubbing 
up during the 3-year 
campaign took place) almost 
meets the criteria (4,9 years of 
margin).

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21

23. 

24. 

When the reform of the COM was implemented in 2008, the combined 
effect of higher aid rates and largely unrestricted access led to a signifi-
cant increase in the demand for this measure in many wine-producing 
Member States, exceeding the funds available in each of the three years 
of the measure. The Commission had therefore to limit the acceptance 
of claims in each Member State to a given percentage of the monetary 
amount of the claims received. The overall situation is shown in Table 1.

Because the demand for the grubbing-up measure during the three years 
of its duration largely exceeded the funds available, a prioritisation was 
needed, indicating that, at the levels set, many more farmers were willing 
to grub-up than those who actually benefited from the scheme. This situ-
ation even occurred in the third and last year of the measure, when the 
aid rates were equal to those in force prior to the reform. This calls into 
question the scale of the increase of the aid rates and consequently the 
efficiency of the measure: the large demand for the measure indicates 
that the same grubbed-up area could have been achieved with fewer 
resources, by smaller increases in the aid rates or even by keeping the 
aid rates at their previous level. 

TABLE	1

GRUBBING‑UP	SCHEME	—	AREAS	CLAIMED,	ACCEPTED	
AFTER	APPLICATION	OF	PERCENTAGE	OF	ACCEPTANCE	AND	
GRUBBED‑UP

Wine Year

2008/09

2009/10

2010/11

Total

Area 
claimed  
(ha)

159 949

108 064

83 210

351 223

% 
acceptance

Area  
accepted 
(ha)

Area 
grubbed‑up 
(ha)

% 
grubbed‑up

45,9

50,1

59,6

50,4

73 377

54 182

49 612

68 903

47 613

44 033

177 171

160 550

93,9

87,9

88,8

90,6

Source: Agriculture and Rural Development DG, Communications from Member States.

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22

20  3,5 million ha as of wine 
year 2007/08.

21  The estimate of the 
total usable production 
permanently withdrawn 
through the grubbing-up 
scheme is based on the 
official communications 
from Member States to 
the Commission on the 
number of ha grubbed-up 
and their classification in 
yield classes, this for the 
3-year period of campaigns 
2008/09 to 2010/11. The 
average usable production 
for the period 2000–08, as 
published by Eurostat, was of 
176,3 million hl.

25. 

26. 

27. 

HOWEVER	THE	 EXPECTED	VOLUME	 REDUCTION	 DID	 NOT	 MATERIALISE	 LARGELY	
BECAUSE	OTHER	MEASURES	DID	NOT	HAVE	THE	IMPACT	FORESEEN

Initially, taking into account the proposed termination of the distilla-
tion measures, the Commission estimated the structural surplus of wine 
to be 18,5 million hl (see paragraph 3), and calculated that reducing 
supply by this amount would require the grubbing-up of 400 000 ha 
over a 5-year period, with a cost of 2,4 billion euro. Later, in 2007, the 
Commission assumed that other reform measures such as the ban of 
sucrose, green-harvesting, rural development, promotion and labelling, 
would reduce the wine surplus by 10 million hl. As a result, the target of 
the grubbing-up scheme was revised to 175 000 ha, with an associated 
budget of some 1,1 billion euro.

However, some of these assumptions did not materialise: the ban of 
sucrose was not taken on board in the final text of the reform whilst 
green-harvesting and promotion have had, as yet, a limited effect. The 
Court considers also that the increase in demand expected from pro-
motion, labelling and rural development lacked specific quantitative 
evidence to support such expectations. In the absence of the planned 
impact from other measures, the target of 175 000 ha from grubbing-up 
was not sufficient, by itself, to address the Commission estimated struc-
tural surplus at the time of the reform.

Thus, although demand for grubbing-up exceeded 350 000 ha (Table 1), 
its impact was limited by the fixed target of 175 000 ha and at the end 
only 160 550 ha were grubbed up. The Court estimates that the grub-
bing-up scheme finally reduced the vineyard inventory area by around 
5 %20 corresponding to approximately 10,2 million hl of wine withdrawn 
or 6 % of the usable wine production21. As shown in Graph 4, EU-27 us-
able wine production and stocks decreased slightly in wine year 2010/11 
but wine consumption also decreased. Even if such reduction in produc-
tion and stocks were confirmed in the long term, a significant increase in 
exports would be necessary to tackle the remaining market imbalances. 

28. 

Graphs 5 and 6 show the latest available data on wine production until 
wine year 2011/12, which follows the three wine years of implementa-
tion of the grubbing-up measure.

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GRAPH	4

RECENT	EVOLUTION	OF	USABLE	PRODUCTION,	CONSUMPTION	AND	STOCKS

l

h
0
0
0
1

180 000

160 000

140 000

120 000

100 000

80 000

60 000

40 000

20 000

0

2008/09

2009/10

Usable production

Human Consumption

2010/111

Final stocks

1  Data relating to wine year 2010/11 are provisional.

Source: Eurostat, supply balance sheet. 

GRAPHS	5	AND	6

EU‑27	WINE	PRODUCTION

l

h
0
0
0
1

190 000

180 000

170 000

160 000

150 000

186 107

179 793

172 956

171 505

171 086

163 599

166 000

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/121

EVOLUTION	OF	THE	WINE	PRODUCTION	FOR	SOME	MEMBER	STATES	(2008/09=100)

120
100
80
60
40
20
0

2008/09

Spain

2009/10

2010/11

France

Italy

Germany

2011/121

Romania

1  Data relating to the wine year 2011/12 are provisional.

Source: Agriculture and Rural Development DG.

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24

29. 

30. 

Overall  EU-27  wine  production  decreased  in  wine  year  2010/11  but 
not in the Member States that had grubbed up the largest area during 
the two first campaigns: Spain (68 447 ha), Italy (20 532 ha) and France 
(16 674 ha). Without new market outlets some of the reduction in pro-
ductive capacity can be offset by an increase in yields in certain regions 
(as described in more detail in paragraphs 36 and 37). The EU-27 wine 
production decrease in wine year 2010/11 is mainly due to a decrease 
in Germany and Romania where the total area grubbed up was respec-
tively 56 ha and 185 ha for the two first wine years of enforcement of 
the scheme. In wine year 2011/12, wine production increased compared 
to 2010. The Court considers that account taken of the climatic condi-
tions, grubbing-up did not yet cause the expected reduction in wine 
production.

22  Recital 68 of Regulation 
(EC) No 479/2008 mentions 
that ‘Where producers 
consider that the conditions 
in certain areas are not 
conducive to viable 
production, they should be 
given the option of cutting 
their costs and permanently 
withdrawing these areas from 
wine production […]’.

GRUBBING‑UP	NOT	TARGETING	THE	LESS	VIABLE	VINEYARDS

The opening up of the aid to most vine growers as well as the criteria 
established by article 85s(5) of Regulation (EC) No 1234/2007 which gives 
priority to farmers above 55 years old or those who opt to grub up their 
entire holdings, means that grubbing-up is not necessarily targeting the 
less competitive or less viable vineyards. This reflects the objective of the 
scheme which leaves it to producers to decide whether their vineyards 
are viable 22. However, it creates the risk of the scheme financing the 
grubbing-up of vineyards that had already been restructured and were 
in principle competitive. The Court found such cases of modernised vine-
yards which were nevertheless grubbed up with EU funds (see Box 3). 
There is thus an inherent tension between the grubbing-up scheme and 
the restructuring measures leading to inefficiencies in the use of EU aid.

BOX	3

EXAMPLE	OF	A MODERNISED	VINEYARD	WHICH	WAS	GRUBBED‑UP	

One of the farmers visited by the Court in Spain opted for the grubbing-up of a parcel of approximately 55 ha 
which had been planted only 11 years previously with a red wine variety (tempranillo) and in espalier structure 
[espaldera] — conditions that match the pattern for which restructuring aid was also being made available to 
other wine growers. The EAGF contributed approximately 420 000 euro for this operation. This highlights the fact 
that the policy is financing the restructuring of older vineyards whilst simultaneously funding the grubbing-up 
of vineyards already having a modernised, market-oriented structure; and illustrates that the grubbing-up aid 
can be unduly attractive even in the case of modern competitive vineyards.

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23  Cross-compliance 
refers to the statutory 
management requirements 
and the good agricultural 
and environmental 
condition mentioned in 
Articles 3 to 7 of Regulation 
(EC) No 1782/2003 of 
29 September 2003 
establishing common 
rules for direct support 
schemes under the common 
agricultural policy and 
establishing certain support 
schemes for farmers and 
amending Regulations 
(EEC) No 2019/93, 
(EC) No 1452/2001, 
(EC) No 1453/2001, 
(EC) No 1454/2001,  
(EC) No 1868/94, 
(EC) No 1251/1999, 
(EC) No 1254/1999, 
(EC) No 1673/2000, 
(EEC) No 2358/71 and 
(EC) No 2529/2001 (OJ L 270, 
21.10.2003, p. 1).

24  Article 85t of Regulation 
(EC) No 1234/2007.

25  Recital 71 of Regulation 
(EC) No 479/2008.

26  Greece, Luxembourg, Malta 
and the United Kingdom (as 
of 2010) opted to irrevocably 
transfer a substantial part of 
their envelopes to the single 
payment scheme.

31. 

32. 

33. 

SHORTCOMINGS	FOUND	IN	NATIONAL	IMPLEMENTING	RULES

After grubbing-up, farmers are subject to ‘cross-compliance’ conditions, 
i.e. subject to possible reduction of the grubbing-up premium in case 
of non-compliance with certain requirements 23 on their holdings for 
a period of three years24. However, in France this obligation is waived 
for beneficiaries who stop entirely their agricultural activity, on the basis 
that in such cases the beneficiaries no longer correspond to the defini-
tion of ‘farmer ’ in the regulation. This interpretation however under-
mines the main objective of the obligation, which is to ‘guarantee the 
responsible treatment of the grubbed-up areas’. Therefore in the Court’s 
view the part of the regulation stating that ‘entitlement to the premium 
should be dependent on compliance by the producers concerned with 
the applicable environmental rules25‘ remains valid, even when farmers 
cease agricultural activity.

RESTRUCTURING	AND	CONVERSION	MEASURE	

IMPORTANT	MEASURE	TO	IMPROVE	ADAPTATION	TO	DEMAND

The restructuring and conversion of vineyards has been a cornerstone of 
the COM in wine since the reform in 1999. The objective of the measure 
is to increase the competitiveness of wine producers through paying 
compensation for the loss of revenue while a vineyard is being adapted, 
and as a contribution to the costs of restructuring and conversion.

Substantial EU resources have been allocated to the measure, not only 
in absolute terms (4,2 billion euro over the decade 2001–10, an average 
of 420 million per year) but also as a share of the total funds of the COM 
(approximately 32 %). This trend continued after the introduction of the 
latest reform, as Member States continued to place a strong focus on the 
measure, now an option among others within their national envelopes. 
At a total cost of some 326 million euro in financial year 2009, it was the 
main choice for all Member States, with the exception of Spain (which 
allocated the largest part of its envelope during financial year 2009 to 
distillation) and other smaller producing Member States, which opted 
to transfer a substantial part of their envelopes to SPS26.

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27  In some regions, such 
as Languedoc-Roussillon 
in France where the 
restructuring measure was 
already being applied since 
the decade of 1980, the 
impact was even higher — 
According to data provided 
by the French paying agency 
FranceAgriMer almost 40  % 
of the vineyard existing in 
1977 was restructured or 
approximately 164 000 ha.

28  The Court noted, for 
example, a substantial 
change in the pattern 
of varieties used by vine 
growers, who increased their 
focus in red-wine varieties 
during the period 2000–10. 
The red-wine area increased 
by 18 percentage points (pp) 
in Spain (to 55 % of the total 
vineyard area), 8 pp to 32 % 
in Germany, 5 pp to 75 % in 
France, and 5 pp to 56 % in 
Italy.

29  Article 103q(1) Regulation 
(EC) No 1234/2007: ‘The 
objective of measures 
relating to the restructuring 
and conversion of vineyards 
shall be to increase the 
competitiveness of wine 
producers’.

30  An example of a potential 
cost-saving factor is 
mechanisation: although not 
covered by the restructuring 
measure, mechanisation of 
certain vineyard operations is 
only possible with a specific 
vineyard structure (e.g. 
espalier) — a transformation 
which in turn, is directly 
supported by the 
restructuring and conversion 
measure.

34. 

35. 

The impact of the measure is significant. For the two largest wine produc-
ing regions Castilla-La Mancha and Languedoc-Rousillon, respectively 
16 % and 21 % of their total vineyard area has been restructured over the 
last 10 years with the support of EU funds27. 

Certain factors are key to ensuring the competitiveness of a vineyard: 
grape variety (whether or not it is adapted to market demand), yield (pro-
ductivity) and cost structure (the cost of production). In this context, the 
restructuring measure, which includes support for varietal conversion28, 
relocation of vineyards or improvements to vineyard management tech-
niques, is generally acknowledged as a fundamental tool in promoting 
competitiveness29, as it facilitates the farmer’s efforts to adapt production 
to demand and to make gains in productivity and/or savings in cost30.

TABLE	2

IMPACT	OF	EU‑FINANCED	RESTRUCTURING	IN	SOME	MEMBER	
STATES	AND	REGIONS

Italy

Spain 
(Castilla‑ 
La Mancha)

France 
(Languedoc‑ 
Roussillon)

Germany

724 860

566 380

295 464

101 541

127 177

90 000

63 166

16 016

Total vineyard area 2000 (2002 
for Languedoc‑Roussillon) 
in ha

Number of ha restructured 
between wine years 2000/01 
and 2008/09 

% Restructured

18

16

21

16

Source: Data collected from Eurostat (Basic and Annual Vineyard Survey) and the national and 
regional authorities visited.

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36. 

37. 

WITHOUT	NEW	MARKET	OUTLETS	INCREASED	YIELDS	FROM	RESTRUCTURING	AND	
CONVERSION	OF	VINEYARDS	CAN	PARTIALLY	OFFSET	GRUBBING‑UP	EFFECTS	

On the other hand, where restructuring leads to increases in vineyard 
yield, this can partially cancel out the effect of grubbing-up in reducing 
the market imbalances unless new outlets are found. This is in particular 
the case as the new EU rules on restructuring no longer prohibit such 
increases, as was the case in the reform of 199931. Although the overall 
results of the most recent restructuring projects are yet to be estab -
lished, there have been increases in yields during the past two decades, 
particularly in Spain where historical yields had been low relative to 
other wine-growing regions (see Graph 7). 

In Castilla–La Mancha, the Court’s analysis of the vineyard register showed 
that restructured parcels have average yields that exceed those of un-
restructured parcels by almost 60 % (see Graph 8). Graph 9 illustrates 
how the effect of grubbing-up on wine production has been partially 
cancelled out by the yield increase in Spain and Italy. If this increased 
production fails to find a market outlet, the problem of the long-standing 
surplus will grow.

31  This issue has been noted 
in the past, and the Court’s 
conclusions in Special Report 
No 4/87 refer specifically to 
it. Commission Regulation 
(EC) No 1227/2000 (OJ L 143, 
16.6.2000, p. 1) on production 
potential seeks to prevent 
increases in yield by 
establishing that ‘Member 
States shall lay down rules 
restricting the use, in 
implementing a plan, of 
replanting rights which arise 
from grubbing-up as set out 
in the plan where so doing 
would lead to a possible 
increase in the yield of the 
area covered by it’. Such 
requirement no longer exists 
in the new COM.

GRAPH	7

TREND	OF	THE	WINE	GRAPE	YIELD	

a
h
/
g
k
0
0
1

120

100

80

60

40

20

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Spain

France

Italy

Source: Eurostat crops products annual statistics.

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GRAPH	8

AVERAGE	YIELD	COMPARISON	BETWEEN	RESTRUCTURED	AND	
NON‑RESTRUCTURED	PARCELS	IN	CASTILLA–LA	MANCHA	FOR	
THE	PERIOD	2007–09

hl/ha

60

37

Non restructured parcels

Restructured parcels

Source: Vineyard register, Castilla–La Mancha.

GRAPH	9

COURT’S	ESTIMATE	OF	THE	GRUBBING‑UP	AND	YIELD	
INCREASE	EFFECT	ON	WINE	PRODUCTION	FOR	SPAIN,	
FRANCE AND	ITALY

l

h
0
0
0
1

20 000

15 000

10 000

5 000

0

-5 000

-10 000

-15 000

Spain

France

Italy

Estimate of the impact on wine production of grubbing up sheme between 1990-2011

Estimate of the impact on wine prodution by increased yield between 1990-2008

Source: Court’s estimate based on Eurostat crops products annual statistics and Agriculture and 
Rural Development DG ’s figures.

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29

The impact of restructuring on production is also increased by the fact 
that projects are eligible for aid even when they are based on planting 
rights coming from a national or regional reserve. The Court noted that 
in Romania the restructuring measure is effectively financing the expan-
sion of vineyard area, instead of renewing the existing holdings, many of 
which are not adapted to current market demand. The Court estimates 
that the impact on production could reach up to additional 250 000 hl 
or 5 % of Romania’s average production during the period 2000–08 32. 
Again, this can contribute to the persistence of market imbalances at 
European level, if increased overall demand does not accompany such 
increased production.

32  This estimate is based 
on the 9 169 ha of planting 
rights available in the 
Romanian national and 
regional reserves, at an 
average yield of 27 hl/ha.

INELIGIBLE	OPERATIONS	TOGETHER	WITH	WIDE	VARIABILITY	OF	COSTS	FOUND	IN	
RESTRUCTURING	AND	CONVERSION

Article 103q of Regulation (EC) No 1234/2007 establishes that support 
for  the  restructuring  and  conversion  of  vineyards  may  only  take  the 
forms of compensation to producers for the loss of revenue due to the 
implementation of the measure and/or of a contribution to the actual 
costs of restructuring and conversion of vineyards which may not exceed 
50 % or 75 % in the convergence regions. The Regulation also establishes 
as activities that can be covered by the measure varietal conversion, 
relocation of vineyards and improvements to vineyard management 
techniques.

38. 

39. 

BOX	4

INELIGIBLE	ACTIONS	FINANCED	UNDER	RESTRUCTURING	AND	CONVERSION	MEASURE	
FOR	THE	WINE	YEAR	2008/09

In the Czech Republic, the audit services of the European Commission found that active and passive protection 
against birds and wildlife actions have been financed under the restructuring and conversion measure on the 
condition that at least 300 hours should be spent in protecting the vineyard.

Land consolidation — the process of rearrangement of land parcels and their ownership — is supported as a ru-
ral development operation under Council Regulation (EC) No 1698/2005, Article 30. In Germany, the Court found 
that an additional amount of 1 500 euro per ha is paid as restructuring aid, in cases involving land consolidation.

The Court considers that neither of the situations described above should be eligible for support under the 
vineyard restructuring and conversion measures — as they fall outside of its normal scope as provided by ar-
ticle 103q of Regulation (EC) No 1234/2007: varietal conversion, relocation of vineyards and improvements to 
vineyard management techniques.

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40. 

The specification ‘vineyard management techniques’ is wide in scope 
and leaves a considerable room for interpretation by the Member States 
which ultimately carry the responsibility for the implementation of the 
measure. The absence of further guidance, particularly in the implement-
ing Regulation (EC) No 555/2008, has two important consequences on 
the effectiveness and the efficiency of the measure: 

33  OJ L 209, 11.8.2005, p. 1.

(a)  Member States have defined a wide range of activities, some of 
which are hardly comparable between each other, while others 
do not relate to restructuring projects at all — examples found by 
the Court’s audit and also by the Commission are shown in Box 4: 

(b)  The Member States’ estimates of the costs of each operation are 
highly  variable,  as  are  also  the  EU  aid  rates  calculated  for  each 
operation. Discrepancies of up to 200 % in the estimated costs of 
similar operations were found, even in cases of similar density of 
vines per hectare.

41. 

42. 

43. 

With the exception of Spain, the Member States visited use flat rates 
per hectare to calculate payments and not a percentage of the actual 
costs borne by the beneficiary. Whilst this procedure is foreseen in the 
regulation, without further controls made by the paying agencies to 
ensure that the EU subsidy does not exceed the regulatory limit of 50 % 
or 75 % of the actual costs at individual level, there is no assurance that 
farmers are not being overcompensated. 

In addition, the Court found specific cases (collective restructuring plans 
in France) of compensation wrongly being paid for loss of income to 
farmers who were not replanting but simply grubbing-up their vineyards; 
and of over-compensation for farmers who were both grubbing-up and 
replanting (up to 6,5 years of lost income, which exceeds the normal 
time when a new vineyard is not productive).

Finally, in France (in the region of Bordeaux), the Court found that ac-
cess to the aid for restructuring a vineyard with a protected designation 
of origin is conditional on farmers joining a specific regional body and 
paying a levy for that participation, an obligation which does not apply 
to those who opt to restructure without EU support. The Court consid-
ers that levy to be an undue reduction of the EU subsidy to which those 
farmers are entitled and consequently that such an obligation does not 
comply with article 11 of Council Regulation (EC) No 1290/2005 33 nor 
article 96 of Regulation (EC) No 555/2008, both of which require pay-
ments to be made in full to beneficiaries. 

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THE	IMPLEMENTATION	OF	NATIONAL	ENVELOPES	AND	CONTROL	
SYSTEMS	AT	NATIONAL	LEVEL

NATIONAL	CHOICES	WITH	A STRONG	FOCUS	ON	RESTRUCTURING

44. 

The ability of Member States to choose the measures best adapted to 
their local circumstances is a key feature of the reform of the wine COM. 
In the financial years 2009 and 2010 (Graph 10), Member States chose to 
place a strong focus on the restructuring and conversion measure, which 
represented 41 % of the total expenditure of the national envelopes 
for those years (714 million euro34 out of a total 1 737 million euro) and 
almost 27 % of the total wine COM budget.

34  During the financial 
years 2009 and 2010, 
expenditure in restructuring 
and conversion was 
particularly notable in Italy 
(168,7 million euro), France 
(148,6 million euro), Spain 
(134,7 million euro) and 
Romania (83,2 million euro).

GRAPH	10

NATIONAL	PROGRAMMES	—	ACTUAL	EXPENDITURE	IN	2009	AND	2010	BY	MEASURE	
AND	THE	FORECAST	FOR	THE	5‑YEAR	PERIOD	2009–13

Expenditure	in	financial	years		
2009	and	2010	
-	National	envelopes	-

Forecast	2009–13	
-	National	envelopes	-

15 %

4 %

5 %

7 % 

10 %

18 %

Restructuring

12 %

Potable alcool distillation 

5 %

41 %

Concentrated must

Promotion 

Investment 

Crisis distillation

Others

9 %

10 %

10 %

15 %

Restructuring 

Promotion 

Investment

39 %

Single Payment Scheme

By-product distillation

Potable alcohol distillation

Others 

Source: Communications from Member States as per Annex IV of Regulation (EC) No 555/2008.

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32

45. 

46. 

47. 

Whilst restructuring is a measure conducive to increased competitive-
ness, not all the choices of Member States in implementing their national 
programmes were in line with the objectives of the reform. In a commu-
nication to the Commission of 1 March 2011, Spain is forecasting to al-
locate almost 450 million euro, or 30 % of its national envelope between 
2009–13, to SPS, one of the measures provided for in the regulation. 
However, in Spain, the largest part of the required SPS entitlements were 
calculated on the basis of historic aid for potable alcohol distillation, 
thereby creating a permanent economic advantage to a specific group 
of vine-growers — those whose production was distilled rather than 
marketed. Unlike those who opted for grubbing-up, these vine-growers 
may continue to supply wine to the market. This expenditure therefore 
runs  counter  to  the  objectives  of  the  reform,  as  it  neither  promotes 
a balance between supply and demand nor constitutes an incentive to 
improve the market competitiveness of vine growers. 

NATIONAL	CONTROL	SYSTEMS	IN	GENERAL	WORK	WELL

For the Member States selected (see paragraph 10), the Court found 
that, in general, control systems covering the legality and regularity of 
transactions worked well, this despite the fact that some features of the 
regulations are particularly demanding for Member States. 

For example, field measurements according to article 75 of Regulation 
(EC) No 555/2008, which are essential for the calculation of grubbing-up 
and restructuring payments, are now based on the actual area occupied 
by vines and no longer on the total size of the relevant parcels — which 
was the criterion used in the past and still is reference for the Land Parcel 
Identification Systems (LPIS) as well as Vineyard Registers. This forced 
some Member States to carry out new on-the-spot measurements of 
parcels and then to maintain databases holding up to three different 
measurements for the same parcel.

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48. 

49. 

50. 

BUT	SHORTCOMINGS	FOUND	IN	SPECIFIC	AREAS	

Despite the Court’s generally positive evaluation of national control 
systems mentioned in paragraph 46, the situations described in the fol-
lowing paragraph call for a review of the discretion given to Member 
States to administer the measures and for additional monitoring by the 
Commission.

All vineyards without corresponding planting rights are unlawful after 
1 January 2010 and must be grubbed-up at the farmer’s own cost. De-
spite this obligation, several Member States acknowledge the persist-
ence of unlawful vineyards in their territories, whilst stating that the 
process of compulsory grubbing-up is ongoing.

THE	 COMMISSION’S	 MONITORING	 ROLE:	 INFORMATION	 AVAILABLE	 BUT	 LIMITED	
ANALYSIS

In order to allow the Commission to fulfil its monitoring role, Regulation 
(EC) No 555/2008 lists the information which should be transmitted by 
Member States at specific dates. The Court considers the information re-
quirements to be thorough. However, the Court notes the lack of specific 
performance indicators that could support an analysis of how the reform 
is performing in relation to its objectives. Relevant indicators, based 
on timely data, would be, in particular, those linked with the increase 
in competitiveness of EU wine producers (imports, exports, prices, vol-
umes) and with the balance between supply and demand (production, 
consumption, stocks).

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CONCLUSIONS AND RECOMMENDATIONS

34

51. 

52. 

53. 

54. 

CONCLUSIONS

Faced  with  a  chronic  structural  surplus  and  the  loss  of  international 
competitiveness across the EU, the reform developed or redesigned tools 
designed to tackle the main problems of the wine market. This is the 
case, in particular, for the longer-standing measures that account for 
most of the spending, grubbing-up and the restructuring and conversion 
of vineyards. 

For the most part, the Commission’s work in preparing the reform was 
extensive in scope and depth, but some of its proposals lacked sufficient 
research. Among these, the Court highlights the planned liberalisation 
of the system of planting rights. In addition, for particular areas, the 
targets set were based on criteria which did not materialise, such as the 
proposal for the discontinuation of enrichment with sucrose, as well as 
the effect of complementary measures such as green harvesting and 
market promotion. 

The grubbing-up scheme is a quick and permanent way of reducing 
production potential, and is therefore a key part of the Commission’s 
aim of reducing the structural surplus. Although the scheme resulted in 
a reduction of supply of approximately 10,2 million hl of wine, the target 
of 175 000 ha proved insufficient to eliminate the structural surplus in 
existence prior to the reform, largely because the assumptions on which 
that target was based did not materialise. The achievement of one of the 
main objectives of the reform will depend upon a significant increase in 
exports to tackle the remaining market imbalances.

Furthermore, the grubbing-up scheme was, with the latest reform, made 
available to the general vine-growing community, as opposed to the 
situation in the past, where Member States had the option to restrict 
farmers’ access to it. This, together with an increase in the corresponding 
aid rates without evident justification by the Commission, generated, in 
most producing Member States, a large demand for the scheme, double 
the funds available. The Court considers that, in these circumstances, the 
scheme could have been more efficient — since it is likely that smaller 
increases or even keeping the aid rates at their previous levels would 
have made it possible to achieve more significant results with the re-
sources made available or the same results with less resources (Court 
estimate of a 100 million euro cost of these increases in aid rates for the 
EAGF).

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55. 

56. 

57. 

The objective of correcting the market imbalances can be hampered 
by the effect of the restructuring and conversion measure observed in 
certain wine producing regions, which experienced a gain in yield per 
hectare over the last two decades. The effects of grubbing-up were par-
tially cancelled out by the yield increase in Spain and Italy. An increase 
in yield would not be a problem if the additional wine that is produced 
is in effect competitive and meets additional market demand without 
replacing other EU production. However, this will require new market 
outlets outside the EU as wine consumption is diminishing in the EU.

Nevertheless, the restructuring and conversion measure has clearly had 
a significant and positive impact at the level of vine growers, by sup-
porting the adaptation of supply to demand of a large area of vineyards 
and contributing to the improvement of vineyard management tech-
niques. However, the Court found that too much discretion was left to 
Member States in implementing the measure, allowing them to finance 
operations which go beyond the measure’s scope and permitting wide 
differences in the flat rates used to calculate payments.

Despite receiving a large amount of information from Member States on 
the implementation of the various measures, the Commission’s moni-
toring role, which should include an assessment of whether the reform 
is meeting its objectives, is limited by the absence of key performance 
indicators. Such a definition is crucial to have a timely measurement of 
the success of the reform.

RECOMMENDATIONS

58. 

As  regards  the  grubbing-up  measures,  taking  into  account  planting 
rights:

 Ū The Commission should establish an estimate of the balance be-
tween supply and demand in the wine sector based on updated 
data, including the planned liberalisation of planting rights. On the 
basis of that estimate it should determine whether any measures 
are necessary to address possible imbalances. 

 Ū Should further grubbing-up measures be considered necessary the 
grubbing-up of modernised vineyards should be avoided by estab-
lishing additional eligibility criteria linked to the vineyard itself and 
not only to the farmer. 

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36

59. 

As regards the restructuring measures:

 Ū Given the wide range of operations defined by Member States in 
implementing the restructuring measure, the Commission should 
establish a more precise definition of eligible restructuring opera-
tions, in particular those allowed under the regulatory heading 
‘Improvements to vineyard management techniques’. 

 Ū In order to avoid overcompensation in those cases where payments 
to beneficiaries are based on flat rates per hectare, the Commission 
should require from Member States a check, at least on a sample 
basis, that the EU subsidy does not exceed the eligible percentage 
of the actual costs.

60. 

As regards the key objective of the reform, to improve the balance be-
tween supply and demand:

 Ū While on the one hand the EU finances the grubbing-up measure 
in order to reduce the surplus of wine produced, on the other hand 
the  restructuring  and  conversion  measure  leads  to  increases  in 
vineyard yields and therefore volumes produced which go against 
the objective of balancing supply and demand without securing 
new market outlets; the Commission should therefore ensure that 
an appropriate policy mix is available to address this tension.

61. 

As regards statistical data, the Commission should define key perform-
ance indicators, relevant to the objectives of the reform, that could pro-
vide a timely measurement of its success.

This Report was adopted by Chamber I, headed by Mr Michel CRETIN, 
Member  of  the  Cour t  of  Auditors,  in  Luxembourg  at  its  meeting  of 
7 March 2012.

For the Court of Auditors

Vítor Manuel da SILVA CALDEIRA

President

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37

REPLY OF THE 
COMMISSION

SUMMARY

II.	and	III.	Joint	reply	
The  2008  wine  reform  aimed  primarily  at ‘increasing the 
competitiveness  of  EU  wine  producers’  (see  Recital  (5)  of 
Council Regulation (EC) No 479/2008).

The wine reform is based on a ‘two phase’ process. It was 
first essential in the first phase of the wine reform to reach 
a market balance by cleaning-up the existing market situ-
ation  through  a  three  years  grubbing-up  scheme  (see 
Recital (59)), while the distillation measures were in parallel 
either abolished or phased-out. It must be reminded that 
the grubbing-up scheme was also meant to help non-com-
petitive wine producers to abandon the sector. Then, the 
second phase of the reform aimed at shifting progressively 
to  structural  measures  (national  suppor t  programmes) 
helping wine producers to enhance their competitiveness 
in order to be able to compete on world markets, bearing 
in mind the expiration of the planting rights regime. 

IV.
The Commission considers that other key decisions of the 
reform, like the phasing-out of the subsidised distillation 
measures have had already a relevant impact on the sec-
tor. The wine reform should not be examined measure by 
measure but as a set of complementing measures (among 
others a grubbing-up scheme and national support pro-
grammes which contain 11 measures).

V.
I n   o r d e r   t o   e n c o u r a g e   w i n e   p r o d u c e r s   t o   g r u b - u p 
non-competitive vineyards with the view to having a bet-
ter market balance it was essential to make the measure 
attractive. The Commission therefore decided to increase 
the premiums by 10 % on average (less than 20 % the first 
year and 10 % the second year) as compared to previous 
levels. The  Commission  considers  that  the  measure  has 
been  a  success,  especially  if  compared  to  the  previous 
scheme.

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38

REPLY OF THE  
COMMISSION

VI.
The  fact  that  the  ban  of  sucrose  had  not  been  imple -
mented, has not impacted the stocks due to the positive 
evolution of the market. The latest data show in fact that 
stocks have diminished by 6,2 million hl in 2010 (-4 %). The 
latest evidence available, stock declarations at July 2011, 
do  show  an  equilibrium  between  production  and  stock 
levels: PDO stocks equal 18 months of production, other 
categories only 8–9 months of production.

In the wine sector, some ‘stocks’ are inherent to the nature 
of wine since most wines are aged (3–36 months) before 
being released on the market. This is particularly the case 
of PDO/PGI wines which represent more than 62 % of the 
EU wine production.

Although the Commission proposal on grubbing-up was 
more ambitious, the fact is that the trend in EU wine pro-
duction has been declining since 2007, whereas exports 
have  increased  since  2010  and  stocks  have  diminished. 
This, in spite of lower consumption in various EU Member 
States.

Wine  producers  are  competing  on  world  markets,  with 
good results, despite relatively low world market prices.

The 2008–11 grubbing-up scheme has reduced the EU pro-
duction by an estimated 10,5 million hl per year.

VII.
The key goal of the wine reform is to enhance the com-
petitiveness of the sector. The restructuring measure is one 
of the measures which allows wine growers to gain market 
shares by improving the quality of wines and by adapting 
their vineyards to the market demand (varietal changes). 
Lower production costs and higher yields, in particular if 
combined with improved quality, contribute decisively to 
make the sector more competitive. In this sense the grub-
bing-up measure was aimed at uncompetitive wine grow-
ers and was not aimed at reducing the volume of produc-
tion of competitive wines.

VIII.
The decision to end the transitional planting rights regime 
had already been taken in 1999 by the Council, therefore 
no impact study was necessary. The 2008 reform only pro-
longed the regime up to 2015. 

IX.	First	and	second	indent
The Commission evaluates the situation of the wine market 
periodically and in particular in the 2012 report to Council 
and Parliament 

IX.	Third	indent
For  the  next  programming  period  (2014–18),  the  Com-
mission will propose to reinforce the definition of eligible 
restructuring operations.

IX.	Fourth	indent
For  the  next  programming  period  (2014–18),  the  Com-
mission will require Member States to verify that no over-
compensation in the costs/flat rates established for these 
operations exists.

IX.	Fifth	indent
The forthcoming 2012 report to Council and Parliament 
will address this issue.

The key goal of the wine reform is to enhance the com-
petitiveness of EU wine producers. The restructuring meas-
ure is one of the measures which allows wine growers to 
gain market shares by improving the quality of wines and 
by adapting their vineyards to the market demand (vari-
etal changes). Lower production costs and higher yields, in 
particular if combined with improved quality, can contrib-
ute decisively to make the sector more competitive. In this 
sense the grubbing-up measure targeted uncompetitive 
wine growers and was not aimed at reducing the volume 
of production of competitive wines.

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IX.	Sixth	indent
The indicators on imports, exports, prices, volumes, con-
sumption stocks, etc. allow the Commission to assess the 
implementation  of  the  reform  especially  as  regards  the 
competitiveness of EU wine producers. However, final bal-
ance sheet data on the 2009–10 campaign (which is the 
first campaign under the new wine CMO), is only available 
since March 2011.

Furthermore,  the  Commission  launched  a  tender  for  an 
evaluation  study  on  the  implementation  of  the  reform, 
which will provide a formal analysis on different aspects of 
the Wine CMO. This evaluation covers aspects such as wine 
producers’ revenue, exports in volume and value, evolution 
of wine products, etc. 

All  this  information  will  be  used  for  the  drafting  of  the 
2012 report, in combination with other indicators provided 
for by Member States relating to the national support pro-
grammes and to the grubbing-up scheme.

39

REPLY OF THE  
COMMISSION

INTRODUCTION

4.
According  to  the  latest  data  imports  remain  since  2007 
almost stable, whereas exports have increased since 2010 
at a higher pace than imports despite the economic crisis. 

5.
The Commission endorses the Court’s conclusion that dis-
tillation measures were contributing to the structural sur-
pluses. In fact, it has been observed that the phasing-out 
of the distillation measures has contributed to an increase 
in exports and reduction in wine stocks.

7.
The final package approved in December 2007 is the result 
of a long and difficult political discussion at Council level 
and at the end reflects the balance of different Member 
States positions and interests.

OBSERVATIONS

14.
The decision to end the transitional regime had already 
been taken in 1999. In 2008 the decision was just to pro-
long it, it was not a new measure proposed in the context 
of the reform. No impact study was necessary on a short 
term prolongation of the regime as initially foreseen by the 
Commission.

15.
In its first proposal, the Commission proposed to abolish 
all distillation measures. At the end of the negotiations, 
some distillation measures remained on a temporary basis. 
This should help to reduce the surplus of wine with the 
view to better achieving a wine market balance (first phase 
of the wine reform).

18.
Regulation (EC) No 1234/2007 also foresees another meas-
ure to address short term production fluctuation. EU Sup-
port  may  be  granted  until  31 July 2012  for  voluntary  or 
obligatory  distillation  of  surplus  wine  decided  upon  by 
Member States in justified cases of crisis so as to reduce 
or eliminate the surplus and at the same time ensure sup-
ply continuity from one harvest to the next (Article 103x). 
From 1 August 2012, Member States may grant national aid 
to wine producers in the same case (Article 182a).

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REPLY OF THE  
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As regards green harvesting in case of excess production, 
due to the fact that the wine market has been in balance, 
it is logical that this measure has not been widely applied 
and could not have the ‘expected positive impact’.

19.	and	20.	—	Joint	reply
The  rules  on  the  grubbing-up  scheme,  as  designed  in 
Regulation (EC) No 1234/2007, have been adjusted bear-
ing in mind that the former grubbing-up scheme did not 
achieve its intended results. Indeed, the prior obligatory 
grubbing-up measure as provided for in the former Wine 
CMO  regulations  was  burdensome  and  has  hardly  been 
applied since 1995.

The ‘one-off ’ grubbing-up scheme (1) is a measure aiming 
at reducing stocks with the view to reaching a market bal-
ance 1 and (2) is to be regarded as a measure for uncom-
petitive wine growers who prefer to leave the sector due 
to their incapability to withstand competitive pressures of 
the global wine market.

Grubbing-up scheme targets wine producers who decide 
to grub-up (1) the totality of their vineyards and (2) wine 
producers of more than 55 years old2.

Whereas the grubbing-up scheme has been adjusted, it is 
still subject to strict conditions3. Member States do have 
the possibility to target the measures according to local 
circumstances  (e.g.  excluding  mountainous  areas,  areas 
with terraces or with slopes, etc.) and to adjust the pre-
mium depending on the yields4.

22.	and	24.	Joint	reply	
In  order  to  guarantee  the ‘success’  of  the  grubbing-up 
measure, the premium had to be defined at EU level and 
set at an attractive level to target all those regions in order 
to encourage wine growers to grub-up non-competitive 
vineyards with the view to having a better balance of the 
market. For this reason the level to which the aid was set 
did  for  the  first  year  not  exceed  20 %  compared  to  the 
aid  level  given  the  previous  years. The  second  year  the 
increase in aid was limited to 10 % only. Even with such 
levels, grubbing-up has been hardly applied for in France 
and in Germany (respectively 2,6 % and 0,1 % of the vine-
yards), whereas it has been largely applied in Spain, Cyprus 
and  Hungar y  (8,5 %,  11,4 %  and  6,7 %  of  the  respective 
vineyards). 

The aid rates had to be set at attractive levels, based on 
objective and non-discriminatory criteria, for most of the 
‘problematic  surplus  regions’  (including  notably  those 
which  used  to  produce  for  distillation). The  risk  was  to 
slightly overcompensate certain regions, an unavoidable 
feature  of  the  EU  policy.  However,  the  specific  value  of 
the premium at national level is established by a decision 
of the Member States concerned, within the limits of the 
scale approved at EU level. The possibility existed for the 
premium to be set at a lower level in order to avoid grub-
bing-up of competitive vine areas. This measure has been 
effective, with a high demand by wine growers. It results in 
lower volumes of production:

 — 2009: 4,1 million hl less;

 — 2010: 7,5 million hl less;

1  See Recital (59) of Council Regulation (EC) No 479/2008.

 — 2011 onwards: 10,5 million hl less yearly.

2  See Recital (68) and Article 102(5) of Council Regulation (EC) No 479/2008.

The Commission therefore underlines the success of the 
grubbing-up regime. 

3  See Articles 85q and 85u of Regulation (EC) No 1234/2007 and Article 
68 of Regulation (EC) No 555/2008.

4  See Article 85r of Regulation (EC) No 1234/2007.

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REPLY OF THE  
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28.
As already mentioned, the increase of yields has not gener-
ated an increase of the whole wine production in the EU.

Production  in  the  EU  has  decreased  by  17,3  million  hl 
(comparing  2004–07 with 2008–11).  Where  locally  an 
increase in yields has taken place, it can have a positive 
impact  on  efficiency,  as  production  costs  are  reduced. 
Important is to improve the competitiveness of EU wine 
producers.

29.
The  grubbing-up  scheme  has  mainly  been  used  in  pro-
ducing wine regions without PDO/PGI, whereas Germany 
mostly produces PDO/PGI wines.

30.
The  grubbing -up  was  aimed  at  achie ving  a   balance 
bet ween  supply  and  demand  (Phase  1)  and  to  help 
non-competitive farmers to leave the sector. The scheme 
leaves  it  to  producers  to  decide  whether  they  apply  for 
the premiums; however it is not logical that viable wine 
growers would apply for this scheme given the level of the 
premiums. 

Box	3	
The case raised by the Court is quite unique and therefore 
cannot be considered as a general practice in Spain or in 
the EU. The success of an individual restructuring project, 
which is co-financed by the EU at 50 %, depends also on 
the extent to which the farmer concerned is sufficiently 
professional. The rules of implementation demanded that 
grubbing-up premium could not been given to vineyards 
that had benefited from restructuring measure in the pre-
vious 10 years, among other eligibility criteria (see Article 
85q of Regulation (EC) No 1234/2007).

In the present case, there is no ‘simultaneity ’ of the two 
measures, since there is a lapse of time of 11 years.

26.
The  fact  that  the  ban  of  sucrose  had  not  been  imple -
mented has not impacted the stocks due to the positive 
evolution of the market. The latest data show in fact that 
stocks have diminished by 6,2 million hl in 2010 (-4 %). The 
latest evidence available, stock declarations at July 2011, 
do  show  an  equilibrium  between  production  and  stock 
levels: PDO stocks equal 18 months of production, other 
categories only 8–9 months of production.

Before 2008, the distillation measures gave rise to a wine 
production exclusively intended for distillation and thereby 
generated an artificial ‘surplus’. Since 2008, Member States 
only made moderate use of the various still available distil-
lation measures.

In  the  wine  sector, ‘stocks’  are  inherent  to  the  nature  of 
wine  since  most  wines  need  to  be  aged  (3–36  months) 
before being released on the market. This is particularly 
the  case  of  PDO/PGI  wines  which  represents  more  than 
62 % of the EU wine production.

Plantation rights have an important influence on volumes 
produced but do not impose a volume per hectare and/or 
producer. Contrary to other quota systems, most likely the 
volumes/ha have been adapted to market expectations. 
Quality improvements with lower yields per hectare have 
taken place in the absence of a distillation outlet.

27.
The 2009–11 grubbing-up scheme should have reduced 
the production by 10,5 million hl of wine per year. With-
out grubbing-up, the 2011 production would have reached 
176 million hl.

In  addition,  EU  production  has  decreased  over  the  last 
period: wine production (volumes/ha) has not remained 
stable and stocks have also decreased.

The  most  important  goal  of  the  reform  was  to  produce 
wines which find a commercial outlet, which may imply 
also an increase of the competitiveness of EU wine pro-
ducers. Indeed in the last two years exports have grown by 
more than 10 % annually.

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REPLY OF THE  
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31.
The Commission will further analyse the Court’s findings 
and, if necessary, it will follow them up via the conformity 
clearance procedure.

36.
The grubbing-up has been applied mainly in areas/farms 
where  the  capacity  to  produce  quality  wines  (PDO/PGI) 
was lower or difficult to achieve. Therefore, there is no con-
tradiction but complementarity in Member States where 
both the grubbing-up scheme and the restructuring and 
conversion measures have been applied. This was foreseen 
in the reform. Higher yields are not negative if they result 
in more competitive quality products that find an outlet.

40.
Suppor t  to  nor mal  management  of  vine yards  is  not 
allowed. The  programmes  presented  or  modified  after-
wards by Member States have been assessed according to 
this principle.

40.	(a)
For  the  next  programming  period  (2014–18),  the  Com-
mission will reinforce the assessment of the restructuring 
measure.

Box	4	—	First	indent
The  specific  cases  mentioned  by  the  Court  (CZ)  are  fol-
lowed up under the clearance of accounts procedure. 

Surplus is not necessarily resulting from high yields but 
more specifically from production which is not adapted to 
market demand. Production of wines for which a market 
demand exists, should be stimulated whatever the yield 
class.

37.
In ‘Castilla-La Mancha’ for example, there is a real potential 
for the production of ‘varietal wine’5, which presupposes an 
adaptation of the vineyard and the wineries. From an eco-
nomic point of view, there is more advantage to producing 
this kind of product in the EU rather than importing ‘vari-
etal wines’ from third countries.

Box	4	—	Second	indent
The Commission services will seek further information from 
the German authorities. 

Box	4	—	Third	indent
[see above] 
On  this  particular  aspect  the  potential  financial  conse -
quences  will  be  determined  by  the  Commission  ser v-
ices in the framework of the ongoing conformity proce-
dures linked to certain Member States. At the time of the 
on-the-spot audits carried out by the Commission serv-
ices, the Court’s observations were already indicated in the 
audit reports.

5  As defined in Article 118z(2) of Regulation (EC) No 1234/2007 and in 
Article 62 of Commission Regulation (EC) No 607/2009. There are wines 
without PDO/PGI which bear on the label the indication of the vine grape 
varieties used for the production and the vintage year.

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However, final balance sheet data on the 2009–10 cam-
paign  (which  is  the  first  campaign  under  the  new  wine 
CMO), is only available since March 2011. Besides, in the 
context of the CAP post-2013, Article 110 of the proposal 
for  a  regulation  of  the  European  Parliament  and  of  the 
Council  on  the  financing,  management  and  monitoring 
of the common agricultural policy addresses specifically 
the monitoring and evaluation of the common agricultural 
policy including, among others, the wine sector.

CONCLUSIONS	AND	RECOMMENDATIONS

52.
The  end  of  the  transitional  planting  rights  regime  was 
decided in 1999. The 2008 reform prolonged temporarily 
the end; it was thus not necessary to evaluate the impact 
of the prolongation. 

53.
The latest data show in fact that stocks have diminished by 
6,2 million hl in 2010 (-4 %). The latest evidence available, 
stock declarations at July 2011, do show an equilibrium 
between production and stock levels: PDO stocks equal 18 
months of production, other categories only 8–9 months 
of production.

In the wine sector, some ‘stocks’ are inherent to the nature 
of wine since most wines are aged (3–36 months) before 
being released on the market. This is particularly the case 
of PDO/PGI wines which represents more than 62 % of the 
EU wine production. 

Although the Commission proposal on grubbing-up was 
more ambitious, the fact is that the trend in EU wine pro-
duction has been declining since 2007, whereas exports 
have  increased  since  2010  and  stocks  have  diminished. 
This in spite of lower consumption in various EU Member 
States.

The phasing-out of market measures such as distillation, 
has forced wine producers to adapt volumes/ha to demand 
and to compete in the world market, with good results, 
despite relatively low prices. 

40.	(b)
For  the  next  programming  period  (2014–18),  the  Com-
mission will require Member States to verify that no over-
compensation in the costs/flat rates established for these 
operations exists.

T h e   C o m m i s s i o n   w i l l   a d d re s s   t h e   i s s u e   t h ro u g h   a n 
appropriate document (internal vademecum, guidelines 
for  Member  States  or  modification  of  Regulation  (EC ) 
No 555/2008).

42.
The Commission services will seek further information from 
the French authorities.

43.
The Commission will examine the situation described by 
the  Cour t  and  will,  if  necessar y,  follow  it  up  under  the 
clearance of accounts procedure. 

45.
The allocation of 450 million euro to SPS foreseen by Spain 
is linked to the removal of the widely used ‘potable alcohol 
distillation’, essential to remove structural surpluses and 
adapt supply to demand.

By removing the potable alcohol distillation measure, an 
important outlet has disappeared for wine leading logically 
to an income loss for vine-growers and a decrease of wine 
prices. This aid per hectare compensates this price fall, as it 
exists in other sectors.

49.
Following  the  communications  sent  by  Member  States 
according  to  (EC)  Regulation  (EC)  No  555/2008  and  the 
last Commission appraisal, Member States have to a large 
extent improved the management of unlawful vineyard. 
Less than around 2 900 ha should be grubbed-up.

50.
The Commission has launched an evaluation study on the 
implementation  of  the  reform,  which  will  provide  a  for-
mal analysis on different aspects of the Wine CMO, such 
as wine producers’ revenue, exports in volume and value, 
evolution of wine products, etc. The indicators on imports, 
exports, prices, volumes, consumption stocks, etc. allow 
the  Commission  to  assess  the  implementation  of  the 
reform  especially  as  regards  the  competitiveness  of  EU 
wine producers. They will be used for the drafting of the 
2012 report, in combination with other indicators provided 
for by Member States relating to the national support pro-
grammes and to the grubbing-up scheme. 

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57.
Regulations (EC) No 555/2008 and (EC) No 436/2009 deter-
mine the data that Member States have to transmit to the 
Commission. The  corresponding  indicators  on  imports, 
exports, prices, volumes, consumption, stocks, etc. allow 
the  Commission  to  assess  the  implementation  of  the 
reform  especially  as  regards  the  competitiveness  of  EU 
wine producers. However, final balance sheet data on the 
2009–10 campaign (which is the first campaign under the 
new wine CMO), are only available since March 2011.

Furthermore,  the  Commission  launched  a  tender  for  an 
evaluation  study  on  the  implementation  of  the  reform, 
which will provide a formal analysis on different aspects 
of the Wine CMO. This evaluation covers aspects such as 
key performance indicators on wine producers’ revenue, 
exports in volume and value, evolution of wine products, 
etc. 

All  this  information  will  be  used  for  the  drafting  of  the 
2012  report  to  Council  and  Parliament,  in  combination 
with other indicators provided for by Member States relat-
ing to the national support programmes and to the grub-
bing-up scheme.

58.	First	and	second	indent
The Commission evaluates the situation of the wine market 
periodically and in particular in the 2012 report to Council 
and Parliament. 

54.
The Commission observes the success of the grubbing-up 
measure, in particular compared with the previous scheme. 
In order to guarantee this, the premium had to be defined 
at EU level and set at an attractive level to encourage wine 
growers to grub-up non-competitive vineyards with the 
view to having a better balance of the market.

55.
Grubbing-up and restructuring aim to adapt the produc-
tion to the demand. As long as a market demand exists, an 
increase of yield can have a positive effect on efficiency, 
income and competitiveness. 

Latest trade information available shows that exports out-
side the EU account for more than 20 million hl (resulting 
in a positive trade balance of 4,4 billion euro).

56.
The  objective  of  measures  relating  to  the  restructur-
ing and conversion of vineyards is to increase the com-
petitiveness of wine producers. For the two first types of 
operations (varietal conversion and relocation of vineyard), 
there is no room for interpretation. The third type of opera-
tions concerns the ‘improvements to vineyard management 
techniques’ which shall be structural operations; Support 
to normal management of vineyards is not allowed. The 
programmes presented or modified afterwards by Mem-
ber States have been assessed following this principle. For 
the next programming period (2014–18), the Commission 
will propose to reinforce this assessment of the restruc-
turing actions, including the flat rate/overcompensation 
issue. Furthermore, the cases mentioned by the Court are 
followed-up under the clearance of accounts procedure.

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61.
The indicators on imports, exports, prices, volumes, con-
sumption stocks, etc. allow the Commission to assess the 
implementation  of  the  reform  especially  as  regards  the 
competitiveness of EU wine producers. 

However, final balance sheet data on the 2009–10 cam-
paign  (which  is  the  first  campaign  under  the  new  wine 
CMO), is only available since March 2011.

Furthermore,  the  Commission  launched  a  tender  for  an 
evaluation  study  on  the  implementation  of  the  reform, 
which will provide a formal analysis on different aspects of 
the Wine CMO. This evaluation covers aspects such as wine 
producers’ revenue, exports in volume and value, evolution 
of wine products, etc. 

All  this  information  will  be  used  for  the  drafting  of  the 
2012  report  to  Council  and  Parliament,  in  combination 
with other indicators provided for by Member States relat-
ing to the national support programmes and to the grub-
bing-up scheme.

59.	First	indent
For  the  next  programming  period  (2014–18),  the  Com-
mission will propose to reinforce the definition of eligible 
restructuring.

59.	Second	indent
For  the  next  programming  period  (2014–18),  the  Com-
mission will require Member States to verify that no over-
compensation in the costs/flat rates established for these 
operations exists.

60.
The 2008 wine reform aimed primarily at ‘increasing of the 
competitiveness  of  EU  wine  producers’  (see  Recital  (5)  of 
Council Regulation (EC) No 479/2008).

The reform was designed in a two phases approach. It was 
first essential to reach a market balance, through a three 
years grubbing-up scheme (see Recital (59)), which con-
tributes to the second phase of the reform focusing exclu-
sively on tools to strengthen the competitiveness of EU 
wine producers.

60.	First	Indent
The forthcoming 2012 report to Council and Parliament 
will address this issue.

The key goal of the wine reform is to enhance the com-
petitiveness of EU wine producers. The restructuring meas-
ure is one of the measures which allows wine growers to 
gain market shares by improving the quality of wines and 
by adapting their vineyards to the market demand (vari-
etal changes). Lower production costs and higher yields, in 
particular if combined with improved quality, can contrib-
ute decisively to make the sector more competitive. In this 
sense the grubbing-up measure was a measure for uncom-
petitive wine growers and was not aimed at reducing the 
volume of production of competitive wines.

Special Report No 7/ 2012 — The reform of the common organisation of the market in wine: Progress to date

European Court of Auditors

Special	Report	No 7/2012
The	reform	of	the	common	organisation	of	the	market	in	wine:	Progress	to	date

Luxembourg: Publications Office of the European Union

2012 — 45 pp. — 21 × 29.7 cm

ISBN 978-92-9237-558-4 
doi:10.2865/84039

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I N   2 0 0 8 ,   T H E   C O U N C I L   A D O P T E D   A   R E F O R M   O F   T H E   C O M M O N 

O R G A N I S AT I O N  O F  T H E  MA R K E T  I N  W I N E  A I M E D  AT  I M P R O V I N G  T H E 

COMPE TITIVENESS  OF  EU  WINE  PRODUCERS  AND  BALANCING  SUPPLY 

AND  DEMAND. THE  FINANCIALLY  MOST  IMPOR TANT  COMPONENTS  OF 

THE  REFORM WERE T WO  AID  SCHEMES,  ONE  FOR THE  GRUBBING-UP  OF 

VINEYARDS  AND THE  OTHER  FOR THE  RESTRUC TURING  AND VARIE TAL 

CONVERSION OF VINEYARDS. THE COURT FOUND THAT THE GRUBBING-UP 

WAS  NOT  SUFFICIENT TO  CORREC T THE  EXISTING  MARKE T  IMBALANCE. 

THE COURT ALSO FOUND THAT THE RESTRUC TURING AND CONVERSION 

M E A S U R E  I M P R O V E D  T H E  CO M P E T I T I V E N E S S  O F   V I N E YA R D S,  B U T  I N 

A NUMBER OF CASES ALSO LED TO AN INCREASE IN WINE PRODUC TION 

FOR WHICH NEW MARKET OUTLETS HAVE TO BE SECURED. 

EUROPEAN COURT OF AUDITORS