Europe's economy will not suffer from oil price increases to the same extent as in the 1970s and 1980s, according to the EU commissioner for economic and monetary affairs, Joaquin Almunia.
Mr Almunia was speaking at an informal meeting of finance ministers from the euro zone in Manchester yesterday. Mr Almunia pointed to the rising demand from China and India as well as the lack of knock-on wage demands as two important factors contrasting current oil price increases with those of previous decades.
"The main reason for these oil price increases is strengthening demand. We need to stress that the world is more resilient to oil price increases," he said.
ECB president Jean Claude Trichet, also in attendance, said that while oil prices remained a risk, current oil prices were not good predictors of future price levels. Mr Trichet also indicated that there was at present no case for changing interest rates but that the ECB was monitoring developments closely.
"Interest rates are appropriate at present levels. The ECB will remain vigilant and take into account all relevant factors," said Mr Trichet.
Mr Trichet faced questions at the meeting on the fate of Italian central bank governor Antonio Fazio. The governor faces demands for his resignation for allegedly favouring an Italian bank in a takeover battle for another Italian bank. Italian prime minister Silvio Berlusconi had previously said he was powerless to force the governor's resignation and that this decision lay with the ECB. But when asked for his view of whether Mr Fazio should resign, Mr Trichet refused to be drawn on the matter. "It is inappropriate for me to say yes or no to this question. I can say that the ECB remains inflexibly attached to the achievement of a single market and a level playing field."
Other issues addressed at the meeting included the challenge of globalisation and third world development. Minister for Finance Brian Cowen said that Europe must move forward to tackle the challenges of globalisation and competitiveness.
Speaking earlier to journalists, UK chancellor Gordon Brown repeated his earlier warnings against reacting to globalisation by protectionism. "Tempting as it may be in the short-term, in the long-term the only way forward is for Europe to invest in skills and research, not to engage in protectionism." Mr Brown's comments came in the wake of an agreement to permit the import of cheap Chinese textiles, a move opposed by several textile-producing member states.
Mr Brown also presented a joint Anglo-French plan to raise funds for third world development. In return for French support for a UK proposal to raise funds for immunisation, the UK is supporting France's plan to raise funds from airline taxes to go towards combating HIV/Aids, TB and malaria in the third world.
Finance ministers will continue their deliberations today in an expanded meeting involving all twenty five EU member states.
