Leading producers Italy and France are looking to slash premium wine output from the upcoming harvest to shore up prices after the coronavirus pandemic hammered sales and led to a glut of stock.
In Italy domestic demand for wine is expected to fall by almost a third after lockdown forced the closure of hotels, restaurants and wine bars for months, and with tourists still all but absent.
Exports have also fallen and wine makers fear a loss of around €1 billion this year, or 9% of total sales.
Rome, aiming for a production cut of around 5% compared to last year, has earmarked €100 million ($119 million) to compensate vintners who throw away between 15% and 50% of their grapes, but wine makers' associations say take-up is likely to exceed the available funds.
For bottles classified as higher quality, such as Chianti Classico and Prosecco, growers can get €1,100 per hectare of land on which the grape harvest is partly destroyed.
Some high-end consortia, like that producing Brunello di Montalcino, which sells for up to €200 a bottle, have set their own production quotas.
Brunello growers have agreed to a 12.5% reduction in output for the upcoming harvest, with an industry source saying they had only sold half of their 2020 target.
Applications for compensation must be made by 10 August.
"The €100 million earmarked by the government will certainly not be enough," Luca Pollini, chairman of the Avito association of high-end Tuscan wine makers, told Reuters.
Tuscany also this week put on the table €6 million to help wine makers build extra storage space, but Pollini said a lot of vintners would rather throw away their grapes.
The region alone already had excess stock equivalent to around 2 million bottles of wine from the previous harvest, he said.
Although France has not put in place a compensation scheme, the harvest of champagne grapes which starts this month is also set to be smaller - though champagne houses and growers have yet to agree by how much.
Champagne producers' group CIVC estimates that as many as 100 million bottles will go unsold this year, with turnover down by more than €1.7 billion.
Its data shows that more than one billion bottles are piled up in champagne cellars, representing several years of potential sales.
The Union des Maisons de Champagne (UMC), which promotes the interests of major Champagne houses including LVMH's Moet & Chandon and Dom Perignon, wants the maximum yield for the 2020 harvest to drop by up to 40% compared to last year.
However, growers do not want to cut their yield by more than 17%, according to local media reports.
UMC Chairman Jean-Marie Bailliere declined to comment on the negotiations but told Reuters he was confident a deal would be struck at a meeting scheduled for 18 August.
Rome and Paris have also set money aside for producers who distil surplus wine into alcohol for use in hand sanitisers and perfumes, and France this week topped up financial support for growers to 250 million euros, saying cash needs were "pressing".
The country's wine industry was already hurting as U.S. tariffs, part of a wider trade dispute between Washington and the European Union, curbed exports. Italian wines have not been subject to the tariffs but officials said fears that could change had boosted exports to the United States earlier this year, inflating stocks and depressing prices.
"The weather has been favourable this year so the harvest should be good but the question for growers is whether they can sell their bottles at the right price," said Ottavio Cagiano de Azevedo, director general of the Federvini wine association.