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G8 Finance Ministers’ Meeting in Osaka Mainly Focuses on High Crude Oil and Food Prices

Slovenian Minister of Finance and current President of the Economic and Financial Affairs Council (ECOFIN), Dr Andrej Bajuk, attended the meeting of the G8 finance ministers on 13 and 14 June 2008 at the invitation of Japanese Finance Minister Fukushiro Nukaga. In his capacity as ECOFIN chair, Minister Bajuk participated in discussions by presenting the positions harmonised at the EU level. The finance ministers exchanged views on the following three issues: macro-economic prospects, including developments on financial markets, and food and crude oil prices and climate change.

The G8 finance ministers met in the light of preparations for the G8 Summit, which will bring together heads of state and government of the G8 countries. In their joint declaration regarding the situation in the global economy, the ministers pointed out that there were risks of an economic growth slowdown, such as the further decrease in real property prices in the United States, continued uncertainties in financial markets, and soaring prices of raw materials, in particular crude oil and food prices. In presenting the EU stance, Minister Bajuk said: “By appropriately preparing itself for the global economy slowdown by way of radical structural reform and significant reduction in government deficit, Europe, on the whole, is tackling this issue quite well. Due to external shocks, the EU economic growth in 2008 and 2009 will be lower than anticipated, but still close to potential growth.”

The conditions in financial markets have somewhat improved in recent months; however, there are still tensions, in particular in financial and credit markets. The level of interbank interest rates remains high. Financial institutions are writing off bad debts in a more transparent and orderly manner and, if necessary, accumulating additional capital. Thereby, Minister Bajuk emphasised: “The EU has reacted promptly to the turmoil and adopted measures to increase the resistance capacity of our financial sector. Under Slovenia’s Presidency a series of important decisions was taken, aiming at financial stability in the EU. One of the most significant decisions was to sign the Memorandum of Understanding on cooperation between ministries of finance, central banks and supervisory authorities for providing financial stability. The Memorandum was signed by 118 signatories and entered into force on 1 June 2008.”

The EU, like the rest of the world, is facing an increased inflation rate, mainly due to high crude oil and food prices. Regarding oil prices, the finance ministers highlighted demand-side measures in their joint declaration after the G8 meeting, particularly enhancing energy efficiency, increasing investment in alternative energy resources and diversifying energy resources. On the supply side, the ministers called upon OPEC and other countries to invest in and increase oil production and refinery capacities. As regards a short-term solution to the problem of high food prices, the ministers called upon the international community to increase assistance to the poorest countries, whereas in the long term they considered higher food production to be most important. The soaring oil and food prices are a global problem; therefore, solutions should be sought at the global level. In this context, Minister Bajuk presented the position of the European Union: “The easing of inflationary expectations is of key importance for the EU. This requires a more coordinated global approach to better respond to the shocks on the supply side. EU Member States will avoid distortion measures as a response to the rising oil and raw material prices, which would prevent necessary adaptations by economic operators.”

In the field of climate change, the G8 finance ministers welcomed and supported the setting-up of a new instrument for environmental infrastructure financing. It will provide financing for projects in the field of clean technologies, deforestation prevention and sustainable development of economies in developing countries. In this context, Minister Bajuk pointed out: “Climate change can be efficiently tackled only at the international level, comprising all key world economies. In this regard, the European Union has already created its own comprehensive strategy, which provides for the reduction of greenhouse gas emissions by 20% by 2020 and an increased use of renewable energy resources.”


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Date: 20.06.2008