Luxembourg, 02/06/2004 (Agence Europe) - Economy and Finance Ministers of the euro zone sought, on Tuesday evening in Luxembourg, to assess the impact that the continuing sharp rise in oil prices would have on their economies. This was before trying to reach an agreement among the 25 within the Ecofin Council on a declaration to be sent to the petroleum producing countries and on the need for coordinated action at European level to answer the problem of the rising price of "black gold" (see below).
Speaking at the Eurogroup, Commissioner Joaquin Almunia drew a somewhat reassuring picture of the economic impact of rising oil prices, mainly in a context of economic recovery. During a press conference after the euro zone ministers' meeting, Mr Almunia assured that the current situation could not be compared to the far more dramatic situation of the second oil crisis during the years 1979 and 1980. He repeated that the price of oil per barrel at its current level close to 40 dollars, with a euro exchange rate close to $1.22, would, in 2004, reduce GDP growth in the euro zone by 0.2 points compared to forecasts, with inflation rising by 0.2 points. "This is not a positive development and the Commission remains concerned, but neither is it an alarming situation", he commented, assuring that "the euro is protecting our economies once again".
In this context, "any coordinated action that can help bring prices back" to the adequate level fixed by OPEC would be "welcome and beneficial for the euro zone and the European economies", he stressed. Mr Almunia added in response to a question that "Member States know perfectly well that they must coordinate their economic policies in order to raise these challenges and to face the difficulties confronting them today with the rise in oil prices". "'The Commission will always help to coordinate measures", Mr Almunia said.
It was obvious everyone remembered what had happened in 2000 when, in Versailles (under French Presidency), the Ecofin Council had recommended coordinated action to respond to the rise in oil prices and that, just a few months later, France had decided to take a unilateral measure to lower taxes on diesel fuel for hauliers.
French Minister Nicolas Sarkozy, who was only too pleased to be able to criticise the action of the Socialist Government of the time, told the press on Tuesday evening that "almost unanimously, ministers hoped the situation of 2000 would not repeat itself". For the most part, ministers stressed the importance of coordination and the dangers of unilateral measures. According to Mr Sarkozy, ministers also stressed the need to "dialogue with producer countries which are willing to step up their production". Given what happened in 2000, the Irish Presidency wished to show proof of caution. Irish Minister Charlie McCreevy declared that it was appropriate to be "neither too confident nor too pessimistic" about the commitment of all ministers in favour of coordinated action.
More generally, Mr Almunia declared that the Commission shared the International Monetary Fund's acknowledgement that the euro zone is confronted by long-term problems. "In light of the weak growth potential and the problem of an ageing population, we agree with the idea of the IMF that these challenges must be raised thanks to the implementation of structural reforms", the Commissioner said. He considers the Lisbon strategy is the "reform agenda needed in this context". Mr Almunia recalled the confirmation made during the morning by Eurostat that there is economic growth in the euro zone and throughout the EU25 of 0.6% of GDP compared to the last three months of 2003.