G8 should tackle food, fuel prices: EU ministers

LUXEMBOURG (Reuters) - Soaring prices at Europe's supermarkets and petrol stations require a coordinated response by the world's top eight economies rather than fiscal or monetary policy changes, EU finance ministers said on Tuesday.

They also said they would look at ways to curb speculation in food and oil, which played a role in the surge in prices.

The chairman of euro zone finance ministers, Luxembourg Prime Minister Jean-Claude Juncker, said he had asked for food and fuel prices to be discussed during the summit of European Union leaders on June 19-20 and at a global level.

"I do think we have to address these issues at G7 and G8 level," he told reporters, echoing the words of EU Economic and Monetary Affairs Commissioner Joaquin Almunia.

The Group of Eight countries are the United States, Canada, Japan, Russia, Germany, France, Italy and Britain.

Dozens of world leaders met in Rome on Tuesday to discuss the wider food crisis, emergency humanitarian aid needs and perhaps longer-term challenges.

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

Food costs rose twice as fast as broader prices in the EU in April, the EU statistics office said, with milk, cheese and eggs surging. Transport fuels cost 12 percent more in April than a year ago, sparking protests across the European Union by truckers and fishermen demanding tax cuts on fuel.

Facing pressure from such protests, French President Nicolas Sarkozy proposed to cap the sales tax on fuel if oil prices continued to rise, a move that got short shrift from others in the EU who fear starting a tax-cutting competition.

Juncker said Sarkozy's idea deserved discussion even if most did not support it. "The French president raised a serious issue and we have to further discuss the issue," he said.

FIGHTING SPECULATION

Juncker said speculation was a major factor behind the rises in food and oil prices and that it needed to be fought.

"There are different possibilities we have to examine, this chapter is not closed. We have to be more vigilant on this aspect of the problem and we have to act," he said.

He also said higher taxes on oil companies were among the options being considered by the ministers.

"We have several proposals on the table. It does not make sense to make specific comments on each of the proposals ... All these proposals have to be examined," Juncker said.

DOWNWARD RACE

Juncker reiterated that EU finance ministers did not want blanket reductions in fuel taxes to cushion the impact of price rises, but were willing to consider focused measures to help those hardest hit.

"As we said in Manchester in September 2005, we are willing to alleviate the burden shouldered by the poor categories of our population," Juncker said.

"We do think that in the course of the next weeks some preparatory work needs to be done in order to show avenues (for) how to react and alleviate the burden by different means, different instruments that could be mobilized," he said.

Belgium and Luxembourg had reacted with tax credits that gave a higher net income to the poorest, he said.

"Things like that should be done," Juncker said.

Others made clear that the European Central Bank should not raise interest rates to curb price increases at a time of slowing economic growth.

Economic growth turned out stronger than expected in the fist quarter of this year in the euro zone, data showed on Tuesday, but economists said a sharp slowdown in the second quarter and subsequent months would follow.

"It's not the monetary policy within the European Union, it's not the fiscal policy within the European Union ... that can deal with this," said Andrej Bajuk, finance minister of Slovenia, which holds the rotating presidency of the EU.

The sharp gains in commodity prices stem from a mix of higher global demand and disruptions in supply of food and oil, including rising consumption by the fast-growing economies of China and India, biofuel production, and weaker harvests.

The weakness of the U.S. dollar has also played a role, Dutch Finance Minister Wouter Bos said.

He said that while oil prices might not rise much more, they were unlikely to fall and the best response was to become less oil-dependent. There was a number of ideas to get the food market working again, he said, but no solution that would work for all.

(Editing by Dale Hudson)