The European Commission appears to favour a sharp cutback in the European Union's (EU) wine-producing capacity as part of its solution for the crisis in the sector.

The Commission will announce its reform plans on 21 June, but rumours in Brussels, confirmed to by officials, say that the plan will cut wine-growing areas in the EU by 400,000 hectares from the present 3.4m hectares, through a five-year grubbing up programme.

Compulsory distillation and other subsidised programmes will be ended, replaced by "national envelopes" providing funds to member states to address special problems of their own. Simpler and less restrictive production methods will be permitted to reduce the EU's competitive disadvantages in world markets, such as allowing blends of EU and non-EU wines.

The overall impact on the wine budget of around EUR1.2bn (US$1.5bn) would be neutral, officials confirmed.