(AFP) – Jun 19, 2008
BRUSSELS (AFP) — EU leaders struggled on Thursday at a summit to overcome divisions over how best to tackle soaring oil prices in the face of recent waves of protests over the cost of fuel.
Following Irish voters' rejection of the European Union's Lisbon Treaty last week, EU leaders had been eager to demonstrate that the bloc can rise to tough challenges like finding a solution to high oil prices.
However, heads of state and government were split on whether governments' responses should include tax breaks and various subsidies to help ease consumers' pain.
With record crude oil prices nudging 140 dollars a barrel, Europe has seen waves of protests against the soaring cost of fuel in recent weeks, led by increasingly militant fishermen, farmers and truckers.
At the same time, consumers have seen their purchasing power also pinched by the rise in food prices, which increased 6.4 percent in May over one year in the 15 countries sharing the euro.
Ahead of the summit in Brussels, French President Nicolas Sarkozy called on the EU to consider cutting value-added tax on fuel, which would require unanimous support among member states to go ahead.
"I wasn't told 'move on, there's nothing to see here'," Sarkozy said after the first day of the summit, adding that his proposal "doesn't solve all the problems but at least that would be a response to a problem that we need to get a hand on."
France also plans various aid for fishermen and truckers, who Spain and Portugal also aim to help through their own measures.
Meanwhile, Italy is going to raise taxes on oil companies' profits, while France plans subsidies to help old people pay for heating fuel next winter, financed by retailers such as Total.
European Commission chief Jose Manuel Barroso said the EU executive would look into the possibility of easing the bloc's tolls for heavy vehicles and special tax rates for energy efficient goods.
"We are ready to study other proposals if the European Council wishes," Barroso said.
However, many other countries are against widespread tax breaks and subsidies to help consumers cope.
"I know that quite many citizens are expressing that why don't we cut taxes?" Finnish Prime Minster Martti Vanhanen said as he arrived for the summit.
"But the reason for high prices of oil is the difference between demand for oil and the production of oil," he said, urging long-term solutions like more alternative energy rather than tax cuts.
Likewise, Danish Prime Minister Anders Fogh Rasmussen also poured cold water on tax breaks and subsidies, arguing: "We need a liberalised energy market in Europe, but I would be reluctant to introduce short time measures that might distort the well functioning internal market."
Barroso said that "states are free to act with measures for most vulnerable people" but he also stressed that "emergency measures must fit with our long-term objectives," which include reducing dependency on oil.
As European leaders mulled over energy prices, Venezuelan President Hugo Chavez threatened to shut off oil exports to Europe and kick out their investments if they enforce tough new EU rules on illegal immigrants.
OPEC kingpin Saudi Arabia has convoked a high-level meeting between big consumer and producer countries this weekend in Jeddah to discuss ways of curtailing soaring oil prices on world markets.
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