EU finance ministers said yesterday that soaring oil prices are threatening the union's growth and called on oil producing companies to increase investment and production.
In a statement issued at the end of the two-day meeting, the EU's Council of Finance Ministers added that the threats to European economies could be minimized if managed properly and said its members should avoid any "distortionary" tax cuts to ease the burden of high oil prices.
"While recognizing that higher ... oil prices present risks to growth, ministers are determined ... that with the appropriate policy response the economic consequences of higher oil prices are likely to be limited," the ministers said.
Britain's Chancellor of the Exchequer Gordon Brown, who hosted the meeting, said oil prices were a "further threat to fragile and slow growth."
"There are significant downside risks not just to the European economy but to global growth," he told a news conference.
Brown called for oil-producing companies to increase supplies and said he had spoken with his Saudi Arabian counterpart earlier in the day.
"The OPEC countries are on standby to increase oil production," he said.
Brown added that OPEC should maintain its oil output at the slightly higher levels that have followed the destruction wrought by Hurricane Katrina on the US Gulf Coast. OPEC next meets on Sept. 19.
The finance ministers said oil companies should use the increased revenues they have gained from high oil prices to raise investment and production, and called for more comprehensive, accurate and timely information on global oil reserves and the demand for oil.
"With a focus on supply and production targets, a focus on proper information from markets and a focus on investing in new productive capacity and refining capacity, we can get oil prices down," Brown said.
Luxembourg Prime Minister Jean-Claude Juncker said on Friday that high oil prices will cut euro-zone growth to 1.1 percent to 1.3 percent this year, well down from the European Commission's previous forecast of 1.6 percent.
He said the growth estimate was based on average oil prices around US$67 a barrel in the fourth quarter of this year and next year. Oil settled at US$64.08 a barrel on Friday on the New York Mercantile Exchange, down from its high above US$70 a barrel but almost 50 percent higher than a year ago.
The European ministers also agreed that further economic reforms were needed to ensure the EU's economy is better able to deal with external shocks.
Ministers also discussed the UK's initiative to counter terrorist financing. The initiative was lent new emphasis after the London bombings in July that killed 52 commuters.
The EU head office also told ministers about ways they can boost aid to the Middle East and help boost the Palestinian economy in the wake of the Israeli withdrawal from the Gaza Strip this summer. The EU already donates some 250 million euros (US$310.45 million) a year to the Palestinians.