EU Boosts Food and Fuel Crisis Aid

During a European summit on June 20, EU leaders discuss handling soaring fuel and food prices. First up, increase food aid for the poor by ¬200 million

EU leaders meeting in Brussels on Friday (20 June) for a European summit discussed a raft of emergency measures to deal with the fall-out from the ongoing global twin crises of soaring oil and food prices.

Most immediately, Europe's food aid scheme that hands out emergency food aid to the poorest EU citizens is to be boosted from €300 million to €500 million.

Other measures will include aid to fishermen, the creation of a new fund to support agriculture in developing countries and moves to boost transparency in European oil and gas markets.

"Our most important concern is for our citizens," said European Commission President Jose Manuel Barroso, who presented the package of measures to the assembled European heads of state and government.

"There are people who are really suffering and having trouble paying their fuel bills and buying food," he continued, telling reporters that the union of 27 member states was witnessing for the first time "a new kind of poverty in Europe".

European leaders discussed and endorsed Mr Barroso's proposals, although the details will be fleshed out in the coming days and weeks. Mechanisms to assess the effectiveness of the measures will be announced as the proposals are fully unveiled.

A range of energy taxation proposals will also be unveiled in the Autumn, Mr Barroso said, including mechanisms to encourage the use of energy efficient products.

In recent months, Europe, like much of the rest of the world, has been rocked by militant protests by farmers, lorry drivers, and others who are most acutely affected by rising oil prices, with European capitals, ports and refineries the focus of a rolling series of blockades, strikes and occupations.

Simultaneously, consumers on the continent have experienced shocking price rises on key food items while in the developing world, the same price increases produced a wave of riots earlier in the year.

Aid for fishermen comes with strings

Fishermen, a number of whom who a fortnight ago shook the European quarter in Brussels with violent protests, will receive an increase in the amount of direct aid from the EU — some €30,000 per vessel and €100,000 per company.

The specific demand of protesting fishermen — government help to cut the price of diesel down to 40 cents a litre from its current 80 cents — was not met.

Further, the aid package — to be presented to the council of fisheries ministers meeting in Luxembourg on 24 June — will be offered on condition that there be a reduction in the fishing fleet to deal with the severe problem of overfishing in European waters.

"Without fish, there cannot be fisheries," warned Mr Barroso.

President Barroso also passed onto the council a suggestion made earlier in the year by agriculture commissioner Marian Fischer Boel that some monies from the common agricultural policy budget be diverted to create a new fund to aid the agricultural sector in developing countries.

Some of the new member states however say that if there is to be a diversion of CAP funds, it should go to increased payments to their farmers first, arguing that they receive less per hectare than older member states.

Nonetheless, the commission's agriculture spokesperson said that there was no overall resistance to the commission proposal, but that changes in aid to their farmers is not on the cards, as these figures are locked into these countries' accession treaties.

Biofuels, which have been forcefully criticised by several international organisations, including the UN, for the role they are playing in pushing up food prices, remain part of the energy equation, the EU leaders insisted.

However, the leaders made a point of emphasising the importance of second generation biofuels, which are not made from edible products and so do not compete with food, and agreed that those that are produced must be environmentally sustainable and not reduce the amount of farm land used to grow food.

Agreement was also reached on the need for research into how commodity trading and speculation is affecting food prices.

The EU is also to call on developing countries not to impose limits or bans on food exports. The commission has repeatedly blamed such restrictions for exacerbating the food crisis as it limits the supply available on the global market, pushing up prices.

No VAT reduction on fuel

As for responses to the crises on the part of national governments, the council agreed that EU countries are free to slap taxes on oil companies' windfall profits in the wake of the rise in oil prices.

Mr Barroso also said that member states are free to reduce excise duties on fuel.

European leaders however, for the most part reacted coolly to French President Nicolas Sarkozy's proposal that value-added taxes on petrol be reduced. His foreign minister, Bernard Kouchner, wants a VAT cap on fuel to be put in place should a barrel of oil reach $200 a barrel.

Chancellor Angela Merkel warned that VAT reductions could have the reverse effect and increase prices still further.

"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.

"My position on that issue will not change," she added.

As a compromise, the European Council asked France, due to take over the six-month rotating EU presidency in July, to conduct a study together with the European Commission on all proposed fiscal measures to deal with the crisis.

President Sarkozy said that the report will be tabled before October.

Sovereign wealth funds

UK Prime Minister Gordon Brown said he is hoping to convince oil producing nations to "recycle" their enormous profits — gathered in so-called soverign wealth funds—and invest them in alternative energy development in Europe.

"Currently some estimate sovereign wealth funds to be worth as much as $3 trillion, and within the next few years this will climb to between $12 and 13 trillion," he told reporters.

European nations are also pinning their hopes on an "international energy dialogue", wherein oil consuming nations attempt to convince producing nations to boost production.

Mr Brown is to attend emergency oil talks in Jeddah, Saudi Arabia, on Sunday, accompanied by energy commissioner Andris Piebalgs.

The meeting is to discuss what can be done internationally to lower oil prices, but analysts do not expect OPEC nations to significantly boost production — a key hope of western governments.