G8 finance chiefs wrestle with oil, food crisis
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June 13, 2008 (AFP) - Finance ministers from the world's leading industrialised powers grappled Friday with runaway crude oil prices and a global food crisis that they fear could threaten economic growth worldwide.
Ministers from the Group of Eight (G8) club huddled here to discuss ways to limit the damage sparked by a doubling of food costs in three years and skyrocketing oil prices.
The G8 will this weekend warn that high oil and food prices pose serious risks to global economic growth, a G8 source said.
"Elevated commodity prices, especially of oil and food, pose serious challenges to a stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressures," according to a draft version of the G8 joint statement.
"These conditions make our policy choices more complicated," it adds, according to the source, who asked not to be named.
"We will remain vigilant and will continue to take appropriate actions, individually and collectively, in order to secure stability and growth in our economies and globally," the draft says.
The G8 was also expected to call for increased investment by energy-producing nations to boost their oil production capacity so as to help rein in prices.
Rising commodity prices have stoked inflation in many countries, raising more fears for the world economy, and come as the United States battles a sharp slowdown sparked by a housing sector slump and related global credit crunch.
International Monetary Fund head Dominique Strauss-Kahn said on the sidelines of the meeting in Osaka in western Japan that the worst of the credit crisis appeared over, but he warned inflation was a serious problem.
"We have good reason to think that the financial crisis is mostly behind us but it's too soon to say" for sure, he told reporters Friday, adding that the IMF thought a proper economic recovery was unlikely until 2009.
Officials have also warned that curbing oil prices is no easy task, with the G8 powers possessing few obvious options to cool the commodity boom quickly.
French Finance Minister Christine Lagarde said the G8 needed harder information about the cause of recent wild swings in crude prices.
"I find it hard to understand the erratic volatility in oil prices" in recent days, she told reporters Friday before the ministers began a series of bilateral talks ahead of their formal meeting Saturday.
Producers insist there is no shortage of oil, blaming speculators and the weak dollar. But analysts say they could still do more to douse speculative froth that helped to push oil prices to nearly 140 dollars per barrel.
Japanese Finance Minister Fukushiro Nukaga said the ministers had to be on alert about the global economy given the threats it faced, even though US financial markets were becoming more stable.
"We need to be very vigilant about the future economic situation," Nukaga told reporters after meeting US Treasury Secretary Henry Paulson for one-on-one talks, adding they had also discussed currencies but declining to give details.
The meeting on Friday and Saturday gathers the top finance officials from Britain, Canada, France, Germany, Italy, Japan, Russia and the United States.
It is also focused on the food crisis and efforts to tackle climate change, including a proposed fund for technology to combat global warming.
Paulson said Washington would help raise money for the new global fund of up to 10 billion dollars that is designed to assist emerging economies adopt technology that can cut the pollution blamed for climate change.
"This is critical. None of us in the world are going to solve this problem unless we deal with it here," he said in a joint conference with Nukaga, his British counterpart Alistair Darling and World Bank president Robert Zoellick.
Central bank chiefs are absent from this G8 gathering, but financial markets are looking for any signs of increased concern about the weak dollar, particularly in Washington.
The G8 ministers had dinner Friday with officials from nations such as Australia, Brazil, China, South Africa, South Korea and Thailand as part of efforts to reach out to non-member countries.