Ecofin discusses impact of Iraq war

European finance ministers agreed yesterday that the crisis in Iraq highlighted the need for a closer coordination of fiscal policies. Economy and Finance Minister Nikos Christodoulakis, currently president of the Council of European Finance Ministers (Ecofin), underscored the need to avoid unilateral measures to reduce fuel prices by cutting taxes. «This would send the wrong message to producers» concerning their own behavior in jacking up prices. EU Economic and Monetary Affairs Commissioner Pedro Solbes told the council that the most likely outcome of a war in Iraq would be a temporary spike in the price of oil, adding that prices would stabilize, likely at a level below $30 per barrel, by the end of the year. This would have a limited negative effect on EU economies, Solbes added. This is probably the most tame of the alternative outcomes thought out by the European Commission and depends on a relatively fast war with no undue complications and aftershocks. However, a prolonged war would certainly tip the already feebly growing EU economies into a recession. Besides the impact of war, there were the usual references to a need for more economic reforms and a greater deregulation of the labor, commodities and capital markets. Solbes expressed his confidence that EU member states could agree on a binding timetable to deregulate railways and energy markets. But such decisions are likely to be taken at the next Ecofin, on April 4-6, in Hania on Crete.

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