:: Inflation crashes party as euro ministers meet
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Mon Jun 2, 2008 4:33am EDT :: FRANKFURT, June 2 (Reuters) - Sky-high fuel and food prices crashed the party when finance ministers flocked to Frankfurt to celebrate the inflation-fighting European Central Bank's 10th birthday on Monday, a milestone in Europe's monetary union.

ECB chief Jean-Claude Trichet set the tone by warning on the eve of the meeting that bad management of the oil crisis in the 1970s caused severe damage to the economy and jobs and that the errors of the past must not be repeated.

Despite mounting protests, several ministers acknowledged the pain but said governments could not and should not slash taxes or condone big wage rises to compensate, warning that this could turn a possibly short-term problem into a long-term one.

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The trouble is Europe, like the rest of the world, is being hit by soaring prices for food as well, which is an even bigger part of household budgets.

Austrian Finance Minister Wilhelm Molterer said he would ask his fellow ministers to consider a tax to counter speculation in commodities futures markets.

Molterer told Monday's edition of Austrian daily Kurier that roughly $40 billion had gone into commodities speculation over the past five months.

"This strong speculative element is responsible for part of the rise in prices," he said. "Politicians must act here. I will therefore put forward such a tax to my fellow finance ministers today. We'll see how they respond to it."

The idea might be problematic for Britain as one of the key centres of commodity futures trading but it had to be addressed, he said.

The recent price spikes are as much about food as oil, and even more so in poor countries where the soaring cost of food commodities such as wheat, corn and rice has a more direct and immediate impact on millions.

Dozens of leaders are due to meet this week in Rome to discuss the global food crisis to consider emergency humanitarian aid and perhaps longer-term challenges.

The price of many food commodities has doubled in the last two years and are likely to remain high for the next decade even if they retreat from recent records, according to the OECD and the UN Food and Agriculture Organisation.

Inflation in the euro zone, which also risks a quite sharp economic slowdown in the months ahead, is running at a record 3.6 percent.

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