Effect of oil prices is minimal so far, Alogoskoufis says

PARIS – Europe has so far prevented high oil prices from pushing up wages and generating serious price pressures – and must continue to ensure this remains the case, Finance Minister Giorgos Alogoskoufis said yesterday. In an interview conducted on the sidelines of the OECD Forum, he declined to comment on the European Central Bank’s policy and said eurozone finance ministers were focusing on the job for which they were responsible – fiscal policy. Alogoskoufis said that while European economies had tended to diversify away from oil, it remained an important economic input for the region. «The main thing that we have to make sure of is that… increases in oil prices do not feed through to the inflation process through secondary effects in the wage round. Up until now, we have successfully tackled this risk,» he told Reuters. «If we make sure we do not have these secondary effects, through the wage round and through the inflation process, then the risks from oil prices will be minimal.» ECB officials have expressed concern about the inflation risks posed by high oil prices at a time when eurozone growth is gathering pace. Alogoskoufis was upbeat about current economic signals. «We seem to have quite firm signs that the European economy is picking up.» However, he declined to comment on the ECB remarks about inflation, which have prompted financial markets to expect the ECB will raise rates in June. ECB president «Mr (Jean-Claude) Trichet has given some signals in public but not in private. It is my habit not to comment on ECB policy. It is not our role to determine monetary policy. It is the role of the Central Bank,» Alogoskoufis said. Instead, eurozone finance ministers were focusing on the budget situation. «We at the Eurogroup are looking at the fiscal situation. There is scope for improvement in the fiscal situation in all countries which are very close to the 3 percent limit, and the ECB is looking at monetary policy,» he said, referring to the EU budget deficit limit of 3 percent of gross domestic product. Asked about the euro’s rise against the dollar this year, he said some exporters were affected but repeated there was little reason for the eurozone to be concerned overall. «We have seen the euro move from less than one dollar per euro to the current rates in the last few years and it is not exchange rates that are the main determinants of trade. It is more general competitiveness issues.»