The EU has spurned France and Italy's demands for crisis distillation – and told the countries they simply have to produce less wine.
Although some subsidies were granted the figures were less than what both countries wanted.
France is allowed to distil a maximum of 1.5m hl of table wine plus 1.5m hl of quality wine, while Italy obtained a maximum quantity of 2.5m hls of table wine and 100,000 hl of quality wine.
Mariann Fischer Boel, EU Commissioner for agriculture and rural development warned against abuse of subsidies in a strongly-worded statement.
'Crisis distillation is becoming a depressingly regular feature of our common market organisation for wine,' he said.
'While it offers temporary assistance to producers, it does not deal with the core of the problem – that Europe is producing too much wine for which there is no market. That is why a deep-rooted reform of the sector is needed urgently,' he added.
'We must increase the competitiveness of the EU's wine producers, strengthen the reputation of EU quality wine as the best in the world, recover old markets and win new ones.'
France had asked the European Union for a 'crisis distillation' subsidy of 2m hectolitres of table wine and 2m hectolitres of quality wine and Italy sought subsidies of 3m hectolitres of table wine and 100,000 hectolitres of quality wine.
Fischer Boel is expected to propose a new 'system that preserves the best traditions of EU wine production and reinforces the social and environmental fabric of wine-producing regions' on June 22.
Large wine surpluses, commonly referred to as 'wine lakes' have been recorded on the wine markets in different EU countries, resulting in a fall in prices and a worrying rise in stocks.
The Common Market Organisation (CMO) allows for 'crisis distillation' in the event of exceptional market disturbances due to major surpluses, and following EU member state requests. Raw alcohol resulting from such distillation can only be used for industrial purposes or as 'bio-fuel' in order not to disturb the market for potable alcohol, which is supplied largely by another distillation system.
The proposals need to be formally adopted by the European Commission. Further demands from Spain and Greece are still under examination.
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