Winemakers will be paid to dig up struggling vineyards as part of radical EU proposals to tackle over-production across Europe.
Winemakers are being told they must be more competitive
Brussels' initiative is the most far-reaching attempt to date to soak up Europe's so-called "wine lake".
Winemakers face economic problems, with falling domestic consumption, excess production and popularity of New World wines, such as from the US and Chile.
Winemakers will also be encouraged to improve marketing and labelling.
Changes to tradition
Without "root and branch" reform, unwanted wine would account for 15% of total annual production by 2011, the European Commission said.
Efforts by individual governments to curb output and to make wine more attractive to foreign buyers have proved largely unsuccessful.
About 300 million litres of French and Italian wine is being turned into ethanol or surgical spirit this year, at a cost of 500m euros to taxpayers.
Brussels has said this policy of "crisis distillation" - which may also be extended to Spain and Portugal - should end by 2011 and is pushing for a fundamental restructuring of the industry.
Its blueprint calls for more than 10% of Europe's vineyards to be pulled down by 2011 on a voluntary basis and the land put to alternative use.
Farmers willing to give up their vineyards will qualify for financial assistance of up to 2.4bn euros.
Other suggestions include subtle changes to techniques governing winemaking, such as the permitted levels of sugar and alcohol.
400,000 hectares to be grubbed up over the next five years
Crisis distillation abolished
Annual retirement packages for farmers of up to 18,000 euros
New policies for categorising and labelling wines
Ban on the use of sugar to enrich alcohol content
This, it is argued, would allow European producers room to innovate by embracing techniques used by US, Australian and South African wine producers - flavouring wine with wood chips, for example.
To make European wine more recognisable to consumers, labelling could be altered to allow greater prominence for familiar grape types - such as Chardonnay - rather than geographical origin.
Mariann Fischer Boel, EU commissioner for agriculture and rural development, said Europe created the best wines in the world but also produced some which no-one wanted.
Winemakers needed to become more competitive while the "reputation" of European wines had to be strengthened.
"Despite our history and the quality of so many EU wines, the sector faces severe problems," she said.
"We spend far too much money disposing of surpluses instead of building our quality and competitiveness."
Winemakers are worried that they are being paid to quit the industry at a time when there is scope for growth for their products in emerging markets like India and China.
"We want to encourage French wine-growers to become more dynamic in the way we sell wines," said Denis Verdier, president of the French Confederation of Winemakers Co-operatives.
Clearer labelling is seen as key to making French wine more attractive
"We have said to the European Commission that it is not enough to pull up the vines, as they are suggesting, because other countries will then simply produce more as we produce less.
"On the contrary, we think we should try to conquer new market share."
Mark Mardell, the BBC's Europe editor, said the EU's proposals would offend many winemakers but reflected the fact that the industry was once again in crisis.