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Last Updated: Jul 7th, 2008 - 08:46:09 |
EUobserver - France is due to make its first appearance in the EU's economic policy chair today (7 July) as EU ministers meet to tackle two issues where Paris has previously sparked controversy: the European Central Bank's interest rate moves and measures to freeze oil prices.
Finance ministers from the 15 eurozone countries are meeting on Monday, followed on Tuesday by the first economic ministerial session conducted by France, which has just taken on the six-month presidency over the 27-nation European Union.
The eurogoup gathering comes after last week's move by the European Central Bank (ECB) to raise interest rates by a quarter percentage point to 4.25, following a record rise of inflation in the single currency area to 4 percent in June.
While that figure is double the Frankfurt-based bank's goal of keeping the bloc's inflation close to 2 percent, the eurozone has at the same time recorded a slump in economic growth, with major European exporters saying that a stronger euro will harm their businesses.
Speaking at a meeting of his centre-right UMP party over the weekend, French president Nicolas Sarkozy said that while he did not regret that he had in the past voted in favour of the ECB's monetary policy being independent, he has doubts about its current policy.
"Without compromising everything I believe in, I have the right as president of the French Republic to wonder if it is reasonable to raise the European rates to 4.25 percent while the Americans have rates of 2.0 percent," Mr Sarkozy said, according to press reports.
But although Germany and Spain also voiced concerns about the consequences of interest rate hikes for the eurozone's economy, Berlin, in particularly, remains keen to stress its continued support for the Frankfurt bank's independence.
Support has also come from Brussels.
European Commission President Jose Manuel Barroso openly gave his support to the bank late last week while Italian prime minister Silvio Berlusconi - critical of the ECB in the past - has said that the bank was right to have raised rates to fight inflation.
"I have had a lot of positive remarks" on the rate rise, ECB chief Jean Claude Trichet told a press conference in Aix-en-Provence on Sunday (6 July), adding that there is a global consensus that "price stability is a necessary condition for sustained growth and job creation."
Energy prices
Just like in its attempts to raise dissent over the ECB's monetary policy, France also appears isolated in its approach to tackling the rising energy prices.
After a summit of EU leaders in June, President Sarkozy failed to get strong support for his proposal to introduce VAT caps to freeze oil prices.
Although the French presidency is expected to push forward with the idea, it is facing opposition both from the European Commission and most member states, including Germany.
German finance minister Peer Steinbruck has said that the key response to the current situation is energy efficiency - one of the goals of the EU's policy package on energy security and climate change.
"Governments should avoid any distortional fiscal measures because the prices have to contribute to these adjustments, which are necessary. I think we shouldn't prevent these adjustments," he said in an interview with the Financial Times on Monday.
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