EU Boosts Food and Fuel Crisis Aid

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The EU is also to call on developing countries not to impose limits or bans on food exports. The commission has repeatedly blamed such restrictions for exacerbating the food crisis as it limits the supply available on the global market, pushing up prices.

No VAT reduction on fuel

As for responses to the crises on the part of national governments, the council agreed that EU countries are free to slap taxes on oil companies' windfall profits in the wake of the rise in oil prices.

Mr Barroso also said that member states are free to reduce excise duties on fuel.

European leaders however, for the most part reacted coolly to French President Nicolas Sarkozy's proposal that value-added taxes on petrol be reduced. His foreign minister, Bernard Kouchner, wants a VAT cap on fuel to be put in place should a barrel of oil reach $200 a barrel.

Chancellor Angela Merkel warned that VAT reductions could have the reverse effect and increase prices still further.

"We believe that we need to look into the root issues and tackle them ... and they do not have a lot to do with VAT," Merkel said.

"My position on that issue will not change," she added.

As a compromise, the European Council asked France, due to take over the six-month rotating EU presidency in July, to conduct a study together with the European Commission on all proposed fiscal measures to deal with the crisis.

President Sarkozy said that the report will be tabled before October.

Sovereign wealth funds

UK Prime Minister Gordon Brown said he is hoping to convince oil producing nations to "recycle" their enormous profits — gathered in so-called soverign wealth funds—and invest them in alternative energy development in Europe.

"Currently some estimate sovereign wealth funds to be worth as much as $3 trillion, and within the next few years this will climb to between $12 and 13 trillion," he told reporters.

European nations are also pinning their hopes on an "international energy dialogue", wherein oil consuming nations attempt to convince producing nations to boost production.

Mr Brown is to attend emergency oil talks in Jeddah, Saudi Arabia, on Sunday, accompanied by energy commissioner Andris Piebalgs.

The meeting is to discuss what can be done internationally to lower oil prices, but analysts do not expect OPEC nations to significantly boost production — a key hope of western governments.

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