High food, fuel prices to stay, EU warns

June 3rd, 2008 - 8:25 pm ICT by IANS  

Luxembourg, June 3 (DPA) Soaring food and fuel prices are a long-term problem and Europe will have to adjust its economy to cope, European Union (EU) finance ministers said at a meeting Tuesday. “Oil prices and food prices will remain at very high levels and this is something new and we have to accommodate and adjust to these problems,” Luxembourg Prime Minister Jean-Claude Juncker, the influential head of the group of countries using the euro, said.

“The fact of the matter is that there are very obvious signs that things are of a more long-term nature than was thought at the beginning,” Slovenia’s Finance Minister Andrej Bajuk, who chaired the meeting in Luxembourg, said.

Tuesday’s meeting was officially set to discuss matters such as Slovakia’s hope to join the euro in 2009, the solvency of insurance companies and VAT on insurance.

Slovakia indeed got the finance ministers’ approval for its euro accession next year, with Juncker saying that he was “very happy to see that Slovakia is fulfilling the criteria” laid out by the EU’s Stability and Growth pact.

But a debate on rising food prices dominated the proceedings as finance ministers discussed whether EU financial policies could help improve the situation.

Food prices across the EU in April were an average of 7.1 percent higher than in April 2007, almost double the overall inflation rate of 3.6 percent, according to the EU statistics office Eurostat.

“The whole discussion should be how to see that our agricultural policy will be much more efficient (and) more responsive to market signals, and also an in-depth look at biofuels programmes and the like,” Bajuk said.

Recent EU-wide protests against fuel prices, which in late May prompted French President Nicolas Sarkozy to propose freezing VAT charges on fuel, also overshadowed the meeting.

“We have to accept external shocks and we have to discuss this at the multilateral level. I hope the next G8 summit (in Japan in July) will consider this issue and will decide how to cooperate among all the countries and regions involved,” EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.

Luxembourg has already introduced a series of tax breaks for people worst hit by the price rises, Juncker said, adding that “things like that should be done.”

But Sarkozy’s proposal seemed unlikely to gain support, with ministers arguing that they should stick to a 2005 agreement not to respond to oil-price rises by cutting taxes.

“I believe that (it) is the view of many of my colleagues, that tax policies are not the appropriate instrument to deal with questions of this kind,” Bajuk said.

“If VAT is excluded by most of us as being the instrument to be mobilized, we have to reflect on other issues … In the course of the next weeks some preparatory work has to be made in order to show avenues to react and how to alleviate the burden,” Juncker said.

Tags: , , , , , , , , , , , , , , , , , , ,

Posted in Business |