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WORLD> Europe
Soaring oil prices fuel division at EU summit
(Xinhua)
Updated: 2008-06-21 15:01
BRUSSELS -- European Union (EU) leaders mapped out a comprehensive strategy on Friday to counter the impact of soaring oil prices, but failed to agree on what to do now.

At the conclusion of the two-day summit here, EU heads of states and governments expressed their concerns about the continued surge in oil and gas prices and its social and economic consequences.

With world oil prices approaching 140 U.S. dollars per barrel this week, a record level once unimaginable, the summit was focused on solutions to the price shock which has recently triggered widespread protests in Europe.

On the eve of the EU summit, hundreds of farmers, truck and taxi drivers blocked part of the roads in and around Brussels Wednesday to protest rising fuel prices, complaining about their impact on their livelihood and demanding that EU governments step in with subsidies.

Facing popular pressure, French President Nicolas Sarkozy urged his EU counterparts at the summit to take emergency measures by capping value added tax (VAT) on fuel to relieve difficulties being experienced by European fishermen, truck drivers and farmers.

But German Chancellor Angela Merkel and Swedish Prime Minister Fredrik Reinfeldt had a different perspective. "We believe that we need to look into the root issues and tackle them ... and they do not have a lot to do with VAT," Merkel said.

Italian Prime Minister Silvio Berlusconi's introduction of a windfall tax on oil companies and redistributing the money to the needy, together with Austria's call for an EU tax on commodity speculation also met cold response from other EU countries.

"These measures can be considered to alleviate the impact of higher oil and gas prices on the poorer sections of the population, but should remain short-term and targeted," EU leaders agreed in their conclusion.

"Distortionary fiscal and other policy interventions should be avoided as they prevent the necessary adjustment by economic agents, " they warned.

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