Europe's top wine-producing countries could be forced to dig up almost 6% of their vines under a scheme mooted by the European Commission.
The New World wine model would not fit Europe, say farmers
EU officials hope the radical five-year plan will dry up huge wine stockpiles and help bolster its position to compete against the New World.
The shake-up of the 1.3bn-euro ($1.7bn; £800m) EU wine budget will now be debated by EU farm ministers.
It has so far received a huge backlash from European wine producers.
Under the five-year plan, initiated by EU Agriculture Commissioner Mariann Fischer Boel, winemakers in EU countries will get cash rewards for producing less wine by abandoning some or all of their poorer quality vineyards.
Compensation of 420m euros is being offered in the first year of the scheme, hoped to begin in August next year for farmers willing to help tear up a combined 200,000 hectares of grape vines - about 6% of the 3.4 million total currently planted.
In addition, the funding of distilling surplus wine into alcohol or biofuel would be halted and the EU would also stop the practice of paying producers for surplus cheap table wine.
This currently makes up the bulk of the EU wine budget under the Common Agricultural Policy (CAP).
The money would instead be used to focus on producing and marketing quality vintages, in order to fend off the growing competition of New World wines from Australia, Chile and the US.
But European farmers have criticised the reforms as "too violent, too extreme", which risks demolishing the foundations of the European wine industry.
EUROPE WINE FACTS
France, Spain and Italy make up 80% of Europe's vineyards
The wine industry in Europe consists of small, independent growers, tied to specific locations
Vine planting is strictly controlled in the EU by area and grape variety
New plantings are banned until 2010 except under certain conditions, but this could be extended to 2013 under the proposal
Jean Louis Piton, chairman of the farmers' union Copa Cogeca, argued that the core of the EU's reform agenda was to impose the New World model on Europe's ancient industry.
"This is a model that does not put agricultural exploitation, wine exploitation and man at the heart of its concerns, but chooses to promote the industry's interests instead," he said.
Other proposals that have raised the hackles of European wine producers include banning the use of sugar in the fermentation process.
This could change the very essence of winemaking in cooler countries such as Austria, Germany and Britain, farmers argue.
It could also face fierce opposition from France, where cane sugar is traditionally used to make champagne.
France, Italy and Spain are not only the EU's, but also the world's, top wine producers by volume.
Together with Germany and Portugal, these five countries alone contribute at least two-thirds of the world's wine exports.
But the industry has been troubled by rising imports and falling sales, while production has far outstripped demand - creating surpluses known as the EU wine lakes.