Luxembourg, 21/10/2004 (Agence Europe) - The somewhat pessimistic outlook of medium-term oil prices have made ministers in the euro-zone tackle the matter although it was not one of the points on the Eurogroup agenda for Wednesday evening in Luxembourg. The main cause for concern with regard growth - the persistent high prices per barrel of crude oil - should not be countered by unilateral measures by Member States, ministers restated. It was, however, because of a measure envisaged by the French government that the debate lasted well into the night, without a collective or adequate response being reached. After the meeting on Wednesday evening, Council President Gerrit Zalm also announced that the French, German, Italian, Portuguese and Greek ministers had all "restated their commitment to bringing their deficits down below the 3% mark in 2005". The Dutch minister specified that the Commission had approved measures taken by his country to correct the deficit.
Nicolas Sarkozy placed the question of oil prices at the heart of the debates at the Eurogroup meeting, reminding his colleagues of his intention to establish a fiscal mechanism in France for recovering additional VAT receipts from oil products. In a letter addressed to Gerrit Zalm, the French Finance Minister considers that, given the worrying price developments, which "are likely to remain high at least until end 2005", it is necessary to "increase oil market transparency" and to "also publish as quickly as possible the figures for European oil reserves first of all on a monthly basis and then weekly". In this aim, he called on the Commission to take initiatives to "limit the risks of economic slowdown in macro-economic terms" and to allow the sectors exposed to rising oil prices to face up to their current difficulties (see p.13). "In parallel, diplomatic action should be conducted by all our countries with producer countries in order to encourage them to increase their investments in production capacity", Mr Sarkozy said. This French lone rider was not to the taste of all ministers, although the issue is crucial for all and certain governments may follow suit.
On the matter of French measures, Gerrit Zalm pointed out: "You can imagine what the turn in the discussion was like, as in June we had agreed that one country should not take unilateral action in this matter. Now we have seen a country acting alone". He went on to say: "We have not reached consensus on a collective coordinated response". During a separate press conference, Nicolas Sarkozy insisted on the points of the agreement, namely: the need to moderate energy consumption by renewing energy savings policy and calling on the International Energy Agency to increase transparency of its information on oil stocks in order to curb speculation. Speaking before the Eurogroup, the prime minister and the finance minister of Luxembourg, Jean-Claude Juncker, had recognised that the sharp rise in oil prices was a "real brake on growth" although he did insist that a "good reaction must be a collective reaction". The Commission will carry out re-assessment of the impact that oil price rises will have, re-assessment that will reaffirm the principle of coordinated action, Joaquin Almunia said, recognising that the situation had developed over four months and that it was becoming "increasingly unstable". Prices around "50 dollars a barrel will have a manifest impact on growth and price levels", he admitted, suggesting that the next growth forecasts would be below the 2.3% envisaged in the spring. Less pessimistic, the Austrian finance minister, Karl-Heinz Grasser, said the "oil bubble will end up exploding".
Highly critical of the case of Greek statistics, provided in the context of the Stability Pact, the German finance minister, Hans Eichel, took a stance against strengthening Eurostat powers with respect to national account auditing, whereas, that same day, Commissioner Almunia had proposed going along these lines (see yesterday's EUROPE, p.7). Before the Eurogroup meeting, Hans Eichel had criticised strengthening. In his view, it is absurd as, if a country does not comply with the rules, then the "others should not have to suffer because of this". Commissioner Almunia retorted that his guidelines were conform to the aim proclaimed by the Council to improve statistical reliability. Mr Grasser, for his part, felt that the Stability and Growth Pact should forsee "sanctions against countries that intentionally transmit incorrect data".
The Greek Finance Minister, for his part, sought to reassure his partners on the recent notifications and the efforts of his government for the 2005 budget. "The Greek government is determined to ensure transparency and to bring its budgetary deficit below 3%", said George Alogoskoufis. The draft budget makes provision to reduce the deficit, currently 5.3% of GDP, to 2.8% in 2005. Discussions on the excessive deficit proceedings against Greece will be stepped up "after the announcement of specific measures" at the next Ecofin Council, on 16 November. Mr Almunia and Mr Zalm hope that the Commission will be able to present "a complete final report" on the Greek deficit situation to this Council, to include the pre-2000 period. The measures proposed by the Netherlands were satisfactory to the twelve ministers and Commissioner Almunia, who believes that they will be able to remain below 3% in 2005. The Netherlands stated that the deficit will hit 2.6% of GDP in 2005, and that this trend will continue in 2006 (2.1%) and 2007 (1.9%). The Commission also agrees with the French forecasts, which set a deficit of 3.6% in 2004, thanks to stronger growth than initially forecast. Germany, on the other hand, increased its deficit forecast for 2004 to 3.7%, but has also committed to do all in its power to respect the 3% mark next year. By including extra measures proposed in July, Italy will have a deficit of 2.9%, announced minister Domenico Siniscalso. If Mr Almunia was hoping that the latest administrative measures, to a total of 2 billion EUR, would have the positive effect anticipated, he nonetheless showed caution in his announcement that the Commission's forecasts, to be published next Tuesday, would show an "Italian deficit of around 3%". Portugal forecasts a deficit of 2.9% in 2004, and one below 3% in 2005, "due to major exceptional measures", said Mr Almunia.