French joint EU oil action call draws mixed response

France persuaded fellow euro zone countries they need to take joint action to temper the economic impact of high oil prices, but took flak from partners for acting unilaterally to soften the blow for its own citizens.

French Finance Minister Nicolas Sarkozy, whose government is under pressure to compensate truckers, fishermen, farmers and households for soaring fuel costs and taxes, plans to return to French consumers the extra tax revenues that are flowing into government coffers due to high oil prices.

He pitched the idea, along with other proposals, to euro zone ministers during a meeting in Luxembourg that kicked off on Wednesday and dragged on into the early hours of yesterday.

Ministers failed to find common ground and will revisit the issue next month, according to Dutch Finance Minister Gerrit Zalm, the chairman of euro zone finance ministers, who took a thinly veiled swipe at France.

"You can imagine a bit how the discussion went probably because in June we agreed that in the field of energy taxation that no country would take unilateral action," Mr Zalm told a news conference.

"Nevertheless we saw some action in one country in the Eurogroup, although of a limited nature," he added.

While he named no names, he appeared to be referring to Mr Sarkozy's plans for French consumers, which were kept under wraps until shortly before the Luxembourg meeting.

Paris infuriated its EU partners during a previous oil price spike in 2000 by heavily cutting fuel tax to defuse nationwide trucker protests. Those tax concessions fanned protests by truckers in other EU states and demands for similar treatment.

European Monetary Affairs Commissioner Joaquin Almunia also stressed the need to coordinate any response to a rise that has seen oil prices hit record highs, with the price of a barrel of US crude topping $55.

"I hope that in next month's debate we will continue to keep the principle of coordination of any reaction of a single member state," he said.

Still, Mr Sarkozy put the best gloss possible on the outcome of the meeting.

"There was a unanimous agreement on moderating consumption, that is to say to start up again a policy of energy saving," Mr Sarkozy told reporters at a separate briefing.

He also said there was unanimous agreement to ask the International Energy Agency to increase transparency in the data published on oil stocks so as to reduce market speculation.

Ministers also asked the Commission to update its assessment of how oil prices will affect the economic outlook.

Mr Sarkozy noted that the euro's strength against the dollar helped shield the single currency area from the full impact of the rise in oil prices, which are denominated in dollars.

Still, the threat that oil prices pose to economic activity was highlighted on Wednesday by Luxembourg Prime Minister Jean-Claude Juncker and Mr Almunia, who said he would cut growth forecasts for 2005 due to increases in oil prices.

The Commission is due to release updated economic forecasts for the euro zone on October 26. Its April forecast predicted euro zone growth of 1.7 per cent this year and 2.3 per cent next year.

The 2004 forecast is likely to be revised upwards to around two per cent, Mr Almunia said last week.

Euro zone finance ministers also discussed budgets and heard pledges by France, Germany, Italy, Portugal and Greece that they would all ensure their 2005 budget deficits were below the EU deficit limit of three percent of gross domestic product.

Greece was particularly in the spotlight following recent massive revisions to its budget data which showed it ran deficits above the EU cap every year between 2000 and 2003.

Mr Almunia presented the Commission's ideas for ensuring the reliability of national budget data and fended off criticisms from Germany that he had gone too far in asking for more data vetting powers for the EU statistics office Eurostat.