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. “We have to accept external shocks and we have to discuss (this) at a multilateral level,” said Economic and Monetary AffairsCommissioner Joaquin Almunia ahead of a monthly meeting of the EU's finance ministers. “I hope that the next G8 summit will consider this issue and decide how to coordinate among the countries,” he said. The Group of Eight countries are the United States, Canada, Japan, Russia, Germany, France, Italy and Britain. Dozens of world leaders were due to meet 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 UN Food and Agriculture Organization. Inflation is running at a record 3.6 percent in the euro zone, which also risks a quite 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 showing the biggest surges, and the worst-hit countries being the Baltic states of Latvia, Lithuania and Estonia. 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 for the worst hit sectors. But EU finance ministers said this was not the way to go, because higher prices are here to stay and tax cuts could pitch countries into a downward race that would ultimately play into the hands of oil producers, not oil-consuming European nations. They also made clear an interest rate rise by the European Central Bank at a time of sharply slowing growth would not be the solution. “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 European Commission and EU countries are to come up with proposals for action to cushion the impact of rising prices on the hardest hit EU citizens later this month. The sharp gains in commodity prices stem from a mix of rising global demand and disruptions in supply of food and oil, including rising consumption by fast the growing economies of China and India, biofuels production, and weaker harvests. Speculation and the weakness of the US dollar have also played a role, a note prepared for the ministers said.
