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Wed 28 May 2008 10:01 AM

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Rocketing fuel costs spark European anger

European leaders face increasing calls for action over soaring fuel prices.

Rocketing world oil prices aroused growing demands for action to hold down European fuel costs, ranging from calls from government leaders to road protests by truckers and blockades by fishermen.

French President Nicolas Sarkozy said on Tuesday the EU should consider capping sales taxes on fuel products if oil prices rose further, but his proposal got short shrift from Brussels.

In an interview with RTL radio in which he sought to allay concerns about accelerating inflation, Sarkozy said there was no sign the price of oil would fall and called on EU partners to consider a joint approach to the problem.

"If the price of a barrel of oil continues to rise, are we going to allow VAT [sales tax] to keep rising proportionately? My proposal is that we should stabilise it," he said.

Any such move would need the approval of all 27 EU member states. Such unanimity may be hard to secure given EU finance ministers pledged in 2005 not to cut taxes on fuel in response to rising energy prices and have since reaffirmed the stance.

The Brussels-based European Commission said it was not clear if Sarkozy's idea was the best response to rising oil prices.

"On another occasion where oil prices were discussed, the Commission said with the member states' agreement that changing taxation on fuels in order to combat increasing prices would send the wrong message to producing countries," Commission energy spokesman Ferran Tarradellas said.

"This would show them that they could increase prices, and citizens would have to pay for this," he said.

Portugal's Economy Minister Manuel Pinho too urged the European Union to take action, warning of the "worrying impact on economic growth".

Sarkozy also suggested siphoning off extra revenues from sales taxes on petrol to create a fund for professionals such as French fishermen, who have been hard hit by the jump in energy prices and have mounted blockades of ports and fuel depots.

Sarkozy said he had asked the government to study how rising revenues from sales taxes on oil could be diverted into a special fund "to help those French who have the most need".

In a separate interview on Tuesday, Economy Minister Christine Lagarde told French television she would raise the question of whether oil producing countries should boost output with France's allies in the Group of Seven industrial nations.

Hundreds of British truck drivers caused road chaos in central London on Tuesday in a protest to demand government help over rising fuel prices. Britain has the highest fuel duty in the European Union.

Truckers from across Britain converged on the capital in convoy, closing a busy artery and causing traffic backlogs. Similar protests took place in Wales, in a fresh headache for Prime Minister Gordon Brown whose leadership is under fire.

The drivers said fuel bills had risen by almost half in a year and demanded a rebate, arguing they were an essential link in keeping the country moving and that many of their businesses were at risk of folding.

The protest came as members of Brown's ruling Labour Party, anxious after dismal electoral results and poll ratings, called for a rethink of plans to increase fuel and road taxes. (Reuters)

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