Sign of trouble looms over EU
Thursday, June 5, 2008
THE surest sign of trouble in Europe is when ministers at European Union meetings all talk about the same thing. Normally, the representatives of the bloc's 27 member states have very different issues on their minds. At the last foreign ministers' meeting in May, for example, different ministers mentioned Russia, Georgia, the Mediterranean and Zimbabwe as their main concern.
But when EU finance ministers met in Luxembourg on Tuesday, just one issue was on their minds: the rise in world food and oil prices.
Unfortunately for the EU's half billion citizens, they ended up by admitting that there was little they could do about it.
"Oil prices and food prices will remain at very high levels. This is something new, and we have to accommodate and adjust to these problems," Jean-Claude Juncker, Luxembourg's vastly influential and experienced prime minister, said.
"I'm not sure whether we've got to get used to rising oil prices, but I do believe we've got to get used to high oil prices," Dutch Finance Minister Wouter Bos said.
The twin problems of soaring global oil prices and rocketing food prices have already pushed themselves to the top of the EU's agenda. When the bloc's heads of government meet in Brussels on June 19, the food issue is set to be one of their main topics of discussion.
Fuel price rises, meanwhile, have already sparked demonstrations across Europe and fierce political arguments as national governments debate how they might adjust their tax policies to compensate the worst-hit industries, such as fishing and road transport.
But as the finance ministers made abundantly clear Tuesday, the solution is likely to be nowhere near as simple - or as painless.
"Tax policies are not the appropriate instrument to deal with questions of this kind," Slovenian Finance Minister Andrej Bajuk, who chaired the meeting, said bluntly.
"It's not a question of European Central Bank policy: it's more a question of national policies, how to increase productivity" in European agriculture, industry and renewable energy, Finland's Finance Minister Jyrki Katainen said.
Europe's economists say that the soaring prices are caused by a combination of poor harvests, rising demand in emerging giants such as India and China, and a shift from food production to biofuel production in some areas, notably the US. That combination left EU finance ministers agreeing that there are painfully few measures that could be deployed to solve it.
The idea of freezing VAT charges on fuel - proposed in late May by French President Nicolas Sarkozy - has been "excluded by most of us," Juncker told journalists.
The European Commission has already warned member states that any attempt to give cash handouts to stricken industrial sectors such as the fishing business would have, under EU rules, to be accompanied by major restructuring and probable down-sizing.
And deeper structural reforms, such as liberalizing the EU's legendarily complex Common Agricultural Policy (CAP), have in the past only come after bitter wrangling between member states.
That leaves EU ministers on all levels facing the unpalatable truth that for all its power, the best the EU is likely to manage on this point is to ask foreign partners to lower their prices, and to warn its citizens to get used to high ones. "There is not much that we can do as far as inflation caused by global phenomena, such as what happens on food markets and what happens on the oil markets, is concerned," Bos conceded.
"We have to accept external shocks, and we have to discuss this at the multilateral level," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.
DPA
But when EU finance ministers met in Luxembourg on Tuesday, just one issue was on their minds: the rise in world food and oil prices.
Unfortunately for the EU's half billion citizens, they ended up by admitting that there was little they could do about it.
"Oil prices and food prices will remain at very high levels. This is something new, and we have to accommodate and adjust to these problems," Jean-Claude Juncker, Luxembourg's vastly influential and experienced prime minister, said.
"I'm not sure whether we've got to get used to rising oil prices, but I do believe we've got to get used to high oil prices," Dutch Finance Minister Wouter Bos said.
The twin problems of soaring global oil prices and rocketing food prices have already pushed themselves to the top of the EU's agenda. When the bloc's heads of government meet in Brussels on June 19, the food issue is set to be one of their main topics of discussion.
Fuel price rises, meanwhile, have already sparked demonstrations across Europe and fierce political arguments as national governments debate how they might adjust their tax policies to compensate the worst-hit industries, such as fishing and road transport.
But as the finance ministers made abundantly clear Tuesday, the solution is likely to be nowhere near as simple - or as painless.
"Tax policies are not the appropriate instrument to deal with questions of this kind," Slovenian Finance Minister Andrej Bajuk, who chaired the meeting, said bluntly.
"It's not a question of European Central Bank policy: it's more a question of national policies, how to increase productivity" in European agriculture, industry and renewable energy, Finland's Finance Minister Jyrki Katainen said.
Europe's economists say that the soaring prices are caused by a combination of poor harvests, rising demand in emerging giants such as India and China, and a shift from food production to biofuel production in some areas, notably the US. That combination left EU finance ministers agreeing that there are painfully few measures that could be deployed to solve it.
The idea of freezing VAT charges on fuel - proposed in late May by French President Nicolas Sarkozy - has been "excluded by most of us," Juncker told journalists.
The European Commission has already warned member states that any attempt to give cash handouts to stricken industrial sectors such as the fishing business would have, under EU rules, to be accompanied by major restructuring and probable down-sizing.
And deeper structural reforms, such as liberalizing the EU's legendarily complex Common Agricultural Policy (CAP), have in the past only come after bitter wrangling between member states.
That leaves EU ministers on all levels facing the unpalatable truth that for all its power, the best the EU is likely to manage on this point is to ask foreign partners to lower their prices, and to warn its citizens to get used to high ones. "There is not much that we can do as far as inflation caused by global phenomena, such as what happens on food markets and what happens on the oil markets, is concerned," Bos conceded.
"We have to accept external shocks, and we have to discuss this at the multilateral level," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.
DPA
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