WRAPUP 3-Inflation crashes party as euro ministers meet

(Adds bullet points, Trichet quotes, April food price inflation)

* Ministers to propose EU relief steps for needy by mid-June

* Austria proposes commodity speculation tax

* No backing for Sarkozy call for EU cap on fuel tax

* Protests continue

By Krista Hughes and Marcin Grajewski

FRANKFURT, June 2 (Reuters) - Sky-high fuel and food prices crashed the party when finance ministers flocked to Frankfurt to celebrate the European Central Bank's 10th birthday on Monday, a milestone in Europe's monetary union.

ECB chief Jean-Claude Trichet set the tone, warning that bad management of the oil crisis in the 1970s -- meaning large wage rises and low interest rates -- seriously hurt the economy and jobs, and that the errors of the past must not be repeated.

Truckers blocked a refinery in France and slowed traffic on several major roads with support from taxi and ambulance drivers in the latest of protests across several European countries.

"This is an act of desperation. We can't keep up with the price rise," said Jean-Paul Lombard, head of a truck freight firm.

Feeling the heat, France called on ministers to think about a European-wide cap on the VAT sales tax levied on fuels, an idea floated last week by President Nicolas Sarkozy.

That got short shrift from others who feared tax cuts would pitch countries into a tax-slashing race that ultimately plays into the hands of oil producers, and not the oil-consumer countries of Europe.

Austria suggested a tax on speculative commodities trading.

Despite the protest, most ministers at the euro zone talks said governments could not and should not slash taxes or condone big wage rises to compensate for price hikes, warning this could turn a perhaps short-term problem into a long-term one.

Instead, meeting chairman Jean-Claude Juncker, Luxembourg's prime minister, said ministers had set themselves the deadline of an EU summit on June 19-20 for European capitals to come up with highly targeted relief measures for the most needy.

The ministers held talks on the matter at ECB headquarters before heading off to ECB birthday celebrations at a Frankfurt opera house, also being attended by central bankers and guests including German leader Angela Merkel.

"This anniversary is no time for complacency," Trichet said.

Officials from the International Monetary Fund raised their growth forecast for the euro zone this year, to 1.75 percent from 1.4, more in line with other forecasts. European officials said the IMF was still being too optimistic about inflation. On fuel troubles, French Economy Minister Christine Lagarde sought to sell to a sceptical audience Sarkozy's suggestion that the European Union consider capping sales tax on fuel products.

German Finance Minister Peer Steinbrueck and Dutch colleague Wouter Bos dismissed that idea, saying EU countries had agreed in 2005 in the British city of Manchester to avoid generalised tax cuts.

"I think France already has quite a few problems in bringing its budget in order. Cutting taxes will not necessarily make it easier for them," Bos said.

"We should stick to the Manchester declaration," Steinbrueck said.

Juncker, who acts as permanent chairman and spokesman when euro zone finance ministers meet, said much the same.

"We stand by this declaration and we think that oil prices, and food prices as well, will remain high, and that short-term tax measures cannot really lighten the burden for all those who suffer ... from higher oil prices in particular," he said.

In a letter released to the media as ministers met, Lagarde said France supported the EU policy but that this should not rule out short-term palliative measures.

FOOD AS MUCH AS FUEL

The trouble in Europe, like the rest of the world, is that the region is being hit as well by soaring prices for food, an even bigger part of household budgets.

Austrian Finance Minister Wilhelm Molterer said ministers should consider a tax to counter speculation in commodities futures markets.

Molterer told Austrian daily Kurier that $40 billion had gone into such speculation in the past five months.

"This strong speculative element is responsible for part of the rise in prices," he said. "Politicians must act here. I will therefore put forward such a tax to my fellow finance ministers today. We'll see how they respond to it."

Juncker, asked what came of the idea at the meeting, said only: "We are taking it into consideration".

Molterer noted that the idea could run into flak in Britain -- not at the meeting because it is outside the 15-country euro zone -- as it is a key centre of commodity futures trading.

In poor countries, the soaring cost of food commodities such as wheat, corn and rice has a direct and immediate impact on millions.

Dozens of leaders are due to meet this week in Rome to discuss the global food crisis and consider emergency humanitarian aid as well as perhaps longer-term challenges.

The prices of many food commodities have doubled in the last two years and are likely to remain high for the next decade even if they retreat from recent records, according to the OECD and the U.N. Food and Agriculture Organisation.

Inflation in the euro zone, which also risks a quite sharp economic slowdown, is running at a record 3.6 percent.

Food prices rose twice as fast as broader prices in the EU in April, the EU statistics office said, with milk, cheese and eggs showing the biggest surges, and the worst-hit countries being the Baltic states of Latvia, Lithuania and Estonia. (Writing by Brian Love; Reporting by Krista Hughes, Jan Strupczewski, Marc Jones, David Milliken, Swaha Pattanaik and Marcin Grajewski in Frankfurt, Dave Graham in Vienna; Jeremy Smith in Brussels and James Mackenzie in Paris; Editing by Dale Hudson)