Examination of Witnesses (Questions 247
- 259)
MONDAY 7 MARCH 2007
MS KATERINA BATZELLI
Q247 Chairman:
First of all, thank you very much for coming and finding time
to meet us in your busy schedule. It is a great delight to see
you.
Ms Batzelli: It is a very great pleasure for
us as Deputies to the European Parliament to have a meeting with
the National Parliaments. It is very important for us to talk
with persons who have an interest in the subject.
Q248 Chairman:
I will very quickly explain who we are. We are the Sub-Committee
of the EU Select Committee in the House of Lords. We consist of
members from all political parties and cross-benchers who owe
allegiance to no political party—so they can do what they
like! We also represent just about all the regions and areas of
the United Kingdom, so we are a very diverse bunch. We have had
the opportunity of reading quite a lot of the background documentation,
your own report and the stuff that came out of both the Commission
and the Parliament, and we have been taking evidence in the United
Kingdom. But we thought that it would be particularly helpful
to us if we came to Brussels and spoke to people like yourself
who are more directly involved. I would like to start by asking
you how you approached doing your own report. What comes out from
the Commission's and some of the background documents is that,
although I do not like to use the word "crisis", there
are major issues facing the wine regime. We have declining incomes
of wine producers, increased import penetration of the European
market, declining consumption within Europe as a whole (although
that is, of course, variable from country to country), and we
are getting into the position of basic structural surpluses. That
represents a pretty powerful set of problems. As you approached
the issue yourself in response to Commissioner Fischer Boel's
Communication, I think it would be helpful to us to know how you
addressed the problem and what your initial policy thoughts were.
Ms Batzelli: First of all, I would like to underline
that my own report was the first report, the draft report, and
I think I was more radical on the policies because they are very
important in order to face the actual problem of the wine sector
as a whole. Knowing all the procedures that take place in any
Parliament and the big national interests of the other Member
States, the final text is more globalised. I think that all of
my colleagues will try to face the three points that you have
mentioned—first, the reduction in income of the wine producers
and farmers; secondly, what is going on with imports from the
New World; and, thirdly, the reduction in consumption of wine
that has taken place in Europe in the last three or four years.
These are three things that nobody can deny. This is the problem
that we are coming to face with the reform of the wine sector.
The challenge is what package of proposals we use in order to
solve these three main points that you raise. One package is greater
liberalisation of the market and the other one is restructuring
the sector, reducing protectionism (if there is some somewhere)
and opening the market. There are two different scenarios. The
first scenario is coming from the proposal of the Commission,
as far as I understand it. You know the proposal and so I will
not repeat it. What are we trying to do as a Parliament? First,
we have to face the reduction in income. There are three reasons
why we have a reduction in income. The first, is because we have
occasional surpluses; the second is because France, which is the
biggest producer of wine, has in the last two or three years interrupted
the commercial contract with the big supermarket networks in Great
Britain; and the third is that the system gives incentives to
increase production (the mechanism of distillation). This was
an anomaly of the system and for that reason in my first report
I did not want this system to exist in the next reform, because
it is not a good signal to the producers of wine and to the farmers.
We have a big surplus for the reasons that I have already explained
and we are trying to delete or change this mechanism that creates
incentives to farmers for the surplus. Imports we cannot avoid.
We are an open world. It is not a question of international trade
organisations; we must be open. We have to focus on the quality
of our products. The reduction in consumption has happened for
three reasons. First, European wine is a little bit expensive;
and, secondly, a lot of people prefer beer or other alcohol. The
third reason is that in some Member States there is high taxation
on alcohol. We cannot intervene in the taxation system because
it is national policy. We cannot say that beer is not good for
health, but we can intervene on the prices. This means we have
to find a way to sell European wines, or some of them, at a more
logical price to the consumer. We formulate the price from the
price of the producer, the commercial price and intermediate costs,
but, of course, even the European Parliament cannot intervene
in the intermediate costs. With regard to the price to the producer,
the wine sector is a part of the agricultural sector that does
not have direct payments to farmers or producers; they do not
take any prices as in other products, and the problem is what
price is given to the farmers from the wine makers' wine. This
is the core of the problem. For that reason we said that we had
to have a safety net for the farmers with two conditions: first,
that they would have to improve their quality and in improving
their quality they would take more money from commercial prices,
and, secondly, they would have to diminish the production of table
wine. This is the big problem in Europe, table wine. It is a huge
production without any control, without any limits, and these
are the wines that are going to the distillation system. Table
wine is the competitive wine from the new world—Australia
or California. They produce table wine. They do not have any Geographical
Indications and so on, so in order to take a space in the market
Europe has to decide what part of the market will be their main
market, and that is high quality wine, not table wine which costs
the budget a lot of money. Those monies that we could save could
be transferred to other uses in the sector—promotion, enforcement
of organisation by producer or inter-professional organisations,
whatever may exist in any Member State. This is roughly speaking
the package of answers we have found in order to answer the main
three questions that you are asking. We cannot answer with "yes"
or "no" but with a global package of proposals.
Q249 Lord Plumb:
We have read your report with great interest. If one were to give
a general view following what you have just said, it is really
tinkering with the situation rather than getting to grips with
the major problems which exist, looking at the longer term, which,
of course, is a concern for all of us. I notice you had 500 amendments
tabled.
Ms Batzelli: It was 560. I am very proud about
that.
Q250 Lord Plumb:
There is nothing unusual in that, of course, and I note the Conservatives
from the United Kingdom and the other countries all voted against
for various reasons, probably thinking it did not go far enough.
You have presented the package of proposals which you have just
been talking about, and overriding this, of course, is—what
is the concern? The concern is surplus. How can people compete
on a level playing field with wines that are coming in from other
countries? One of the areas—and I mention only one because
colleagues will pick up on the others—is that, to deal with
surpluses in the past, if it was the Common Agricultural Policy,
we tended to say we would either put on restrictive quotas or
we would take animals out of production and so on. In this case
it is taking vines out of production by grubbing them up. There
must have been a lot of reservations about how far you could go
with the grubbing-up procedure. In your report you say that you
are not opposed to the initiative of grubbing up if individual
producers are able to approve or reject permanent abandonment,
using various environmental, social and geographic criteria. What
we would like to hear about from you is how you see the grubbing-up
regime working, including the proposal for the introduction of
temporary grubbing-up.
Ms Batzelli: It is better to have some friends.
Temporary grubbing-up was not in the framework of the compromise
with friends.
Q251 Lord Plumb:
You have partly answered this as we understand it, but is that
part of the scheme? And, if it is part of the scheme, are we not
still going to get criticism from a lot of the growers saying,
"While we are grubbing up, more wine is coming in from elsewhere,
which is taking our market"? That is what I read in that
report. I also noticed that you had evidence from some 26 different
organisations. I think 15 of them were French. It tends to get
a little biased, does it not, if you are taking that number from
one country?
Ms Batzelli: I would like to mention openly
something that was very interesting even for me. In that round
of negotiations the French delegation here did not press me a
lot. Why? I am old enough to understand why: because they have
three or four different scenarios in every region of France on
the reform of the wine sector. They do not have a common approach
for the reform of wine. Bordeaux is very different from the south,
even reading the proposal of the Commission. This was my first
point. The second point is that the French see the wine sector
as their property. The wine sector is one part of its history,
and really I expect that they do not want in any case to grub
up some vineyards permanently. For that reason they insist on
introducing temporary grubbing-up, "And, guys, we will see
after three or four or 10 years what is going on with the market
and then probably we can use our quotas to produce wine again".
This is the reason why temporary grubbing-up is in my report.
It is the only delegation that is doing that, because, if you
read it, there is a conflict between temporary grubbing-up and
all the other texts. There is a lot of confusion but we have to
do it. Grubbing-up as a whole policy is the main key to reducing
production, especially in the small vineyards because, according
to the statistical base of the Commission, around 20 or 30% of
the European vineyards are very small and the proposal of the
Commission is very attractive. Politically, nobody from my committee
could accept this proposal of the Commission as it is. For that
reason, as you mentioned, Lord Plumb, we erased a quarter of the
grubbing-up in every Member State, in regions or at the national
level, on the basis of certain criteria, some of which are negative
incentives to discourage grubbing-up or to encourage grubbing-up.
We are not against it totally but we try to find a new formula.
It is one of the best points, that the Commission in the Plenary
said that they were going to accept the criteria that have been
adopted in this report.
Q252 Viscount Brookeborough:
We understand that the Parliament would quite like to reform it
in two phases and that Commissioner Fischer Boel was critical
of the report's approach to distillation. The Parliament's particular
suggestion was to convert the various distillation measures into
two, compulsory and voluntary. Could you indicate how these forms
of distillation are to be funded? I understand that what you said
was that you, perhaps personally or from the point of view of
your committee, are entirely against distillation continuing into
the future.
Ms Batzelli: The next point that was most important
in my report after grubbing-up was distillation. In my primary
report I did not support any distillation system, even for the
first period of the reform. Now we propose a package of distillation
systems and this proposal came after pressure, especially from
the Spanish, because the system works in favour of the Spanish
distillation system. They absorb around 30% of the Community budget
in wine just for distillation and, of course, you know that nobody
can reject this kind of money.
Q253 Lord Plumb:
Even I would not.
Ms Batzelli: But there we have two problems.
We have the normal distillation system, crisis distillation, that
sometimes is needed, and distillation into potable alcohol. The
potable alcohol concerns only Spain and Portugal. In Portugal
in port all the owners are English, as you know. It is concerning
your country or your citizens, but really the potable alcohol
in port is totally different from Spain; even the organisation
is different, and the import is based on the wine, and in Spain
on alcohol. I do not know the word in English but it is two different
things. What we have said now is that we will reform in two phases,
and we have said that the distillation system for potable alcohol
will be accepted as a mechanism in the first period. In the second
period we will delete it or put it in the "national envelope",
but even this potable alcohol mechanism that will remain will
not be the same as the actual; it will be based on the mechanism
of by-products. That means that it will cost not so much money
and it will be a mechanism that contributes also to environmental
questions. The Spanish are not so happy, which is normal, but
I had a great deal of pressure from the Spanish delegation, all
of them, so that finally they voted against my report because
of this distillation system.
Q254 Viscount Brookeborough:
Without knowing anything about the situation of the alcohol going
to Portugal for the port, surely alcohol that comes from distillation
that has got a further commercial use is paid for by the people
who have the commercial use for it? Are you saying that crisis
distillation is, first of all, paid for by the EU and then is
sold on at a profit thereafter into another business? Should not
the end business be funding that?
Ms Batzelli: This is the main argument of the
Commission, that the wine sector of the Common Agricultural Policy
could not pay for the alcohol sector. This is the main argument
but I do not think that, for British Portuguese or Spanish Spanish,
we have to reform the system radically from the first moment and
not give them a period of two years in order to reconsider the
way they work, the incentives that are given to the producers
and for promotion policy. Port producers have a huge budget for
promotion. On the contrary, in common with the Spanish, they pay
the producer to produce huge quantities to go to distillation.
They are two different things. The British, in any country they
work in favour of the market.
Q255 Viscount Brookeborough:
So some of the farmers are producing wine at a quality at which
they know perfectly well it will never be drunk in order to get
the distillation price?
Ms Batzelli: Yes, you are right. In order to
understand the whole distillation system, there are four distillation
systems and each of them works in a different way in Member countries.
Q256 Viscount Ullswater:
We were told that the reform was likely to be budget neutral,
but in the report you make several references to the budgetary
situation. Some of your colleagues fancy a two-phase staging of
this, and in Paragraph 8 suggest that you would need additional
funding. Would you like perhaps to comment on whether you think
it is a bit premature to conclude a wine reform before the CAP
2009 review?
Ms Batzelli: If we say additional Community
budget, it was not on the level to vote to finish. Nobody believed
that we were going to take an additional Community budget for
the wine sector. This is something that does not happen and we
do not want it to happen. What we wanted was that we needed more
financing from the national budget in that sector. This was the
first point in the report of our discussion. Why? It was a way
of financing all the measures that finally we are going to decide
will take place. It is concerning the paragraph on the "national
envelopes" and how this measure will be financed, including
a supplementary budget from the national pocket. Concerning the
health check—the review—we will see, because first
of all we will have a discussion in the European Parliament on
the rebate. Nobody touched the wine before we talked about the
rebate.
Q257 Lord Cameron of Dillington:
There seems to be a bit of a dispute between you and the Commission
over the amount of money that stays in Pillar 1 and money that
might go to Pillar 2, but it seems to me logical that, if you
follow the grubbing-up process that Lord Plumb was talking about,
you should then put money into that area to redevelop new industries,
to give new employment, and it seems to me logical that some money
should go into Pillar 2 as part of the whole process. How would
you respond to that?
Ms Batzelli: You are right for the future, but
in the actual situation we could not accept that u-turn. Why?
First of all, we try to keep the Community budget for the wine
in Pillar 1. When we have finished whatever is the reform of the
wine sector, the budget will be divided by certain criteria that
are not under discussion in every Member State, and that budget
will be added to the "national envelope" of all those
agricultural products that have already reformed—cereals,
cattle, fruit and vegetables in the next month; and then even
the wine sector will be under rules of modulations. You know what
I mean by modulations?
Q258 Lord Cameron of Dillington:
Understood, yes.
Ms Batzelli: We know even the Scottish problem
here. We know everything, do not worry. That means that some money
from the wine sector in the First Pillar will be transferred anyhow
into the Second Pillar of agricultural and rural development,
and the governments can do whatever they want. As a target it
is correct, but at the first phase of negotiation it was not possible
to accept it at this moment.
Q259 Lord Bach:
I am delighted to hear your radical stance on all this. You said
your draft report was written in a radical way. I hope you have
not lost your radicalism as you have had to go through with it.
Ms Batzelli: I hope not.
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