EU ministers disagree on fuel tax breaks

European Union finance ministers failed early today to agree on tax breaks to ease the impact of high oil prices, despite sharp prodding from France and dire warnings that they were threatening economic growth.

At a five-hour meeting in Luxembourg, French finance minister Nicolas Sarkozy urged other EU countries to follow his lead in pledging to cut the tax rate on fuel at home to return rising revenues to the taxpayer.

Sarkozy has also promised aid to farms and other businesses unable to pass on higher fuel costs to their customers.

“In view of the urgency of the problem currently facing our countries, I definitely want us to adopt as soon as possible a series of effective measures,” Sarkozy said, before the session that began last night.

But Dutch finance minister Gerrit Zalm, who chaired the meeting, said ministers were unable to agree on what would be an “adequate” and “co-ordinated” response to persistently high oil prices that threaten to put a damper on growth.

Officials also warned Sarkozy not to break ranks.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said his office “continues to stick up for rigorous co-ordination of any action”.

Last June, EU finance ministers promised not to engage in any “unilateral action” that could affect the single market.

The aim was to avoid a row that broke out during the last oil crunch in 2000, when France, Italy and the Netherlands gave rebates and other breaks to commercial users, causing bitter complaints from competitors in other EU countries.

At a separate news conference, Sarkozy avoided a clash by saying he would await an analysis by Almunia and proposals for responding to oil price developments, due at the next finance ministers’ meeting on November 16.

But he indicated he would not give up on his plan.

The strong euro has helped to cushion the impact of record prices in Europe, but that effect has been wearing off as oil prices climb faster than the dollar sinks.