Under current regulations, European wines are stored in oak barrels for varying periods of time in order to impart an oaken flavour. This technique adds about 2 to the cost of a bottle of wine, while New World producers, who have the option of putting wood chippings in the wine instead of using barrels, can sell at significantly lower prices.

"You get what you pay for, " said James O'Connor of Greenacres Wine Merchants in Wexford.

"To me that is not the right way to do things, but as a wine merchant, I like the idea of wine being matured in oak barrels. Oak chippings impart a flavour that is just disguising the taste of the wines."

The practices of dilution and of flavouring wine with wood chippings instead of in a traditional barrel are widespread in new wine-producing countries such as Chile, the US and Australia, but banned for European wine producers in France, Italy and Spain.

With EU wine exports struggling to keep up as New World sales rise, the commission says Europe should learn from its young cousins.

"There is 20% too much wine being produced in Europe, which is not sold because it is regarded as expensive, " O'Connor said.

"Old world wine producers need to market their wines more effectively and educate people on the advantages of buying wine that is traditionally made."