Oil price rises will impact euro economy: ECB banker

The rise in oil prices will have an impact on the eurozone economy, but the situation is not equivalent to the 1973-74 oil crisis, European Central Bank Vice President Lucas Papademos said on Sunday.
"There are major differences from that period," Papademos told the Italian financial newspaper Il Sole 24 Ore in an interview.
"First of all, the increase in oil prices in the early 1970s occurred over a limited, two-month period, whereas the current upward trend in the price of oil has lasted 67 months: it has already exerted much of its impact on inflation and growth.
"All the same, the increase over the last few months cannot fail to make an impact on the European economy," he said.
The interview is available in English on the ECB Web site www.ecb.int/press.
US light crude struck $44.77 a barrel on Friday, the highest level in the 21-year history of crude futures on the New York Mercantile Exchange, after a renewed threat to Russian oil major YUKOS added to the strain on world supplies.
Papademos said ECB forecasts showed a 10 percent increase in oil prices would push euro zone inflation up by 0.1 percentage point per year over the following three years.
He added that if the price of oil were to remain above $40 per barrel for some time, inflation in the euro zone would exceed 2.0 percent per year until the end of 2004 and for a few months in 2005. Inflation was an annual 2.4 percent in July.
"That being said, from our point of view, and taking account of the likely influence of all the determinants of price developments, we believe that annual inflation will average below 2.0 percent in both 2005 and 2006," he said.
Members of the European Central Bank met on Thursday and kept the benchmark rate of the 12-nation euro zone at a record low of 2.0 percent. No tightening is expected before next year.
Papademos reiterated the ECB was "keeping a close watch."
"We want to prevent the recent increase in inflation and, in particular, the visible rise in oil prices spilling over into wages," he said, adding: "There is, however, no bias regarding the monetary policy stance in the future."
He added that the ECB still considered that in 2004 the euro zone might exceed the growth rate previously forecast. The ECB currently has a mid-point forecast of 1.7 percent GDP growth this year, rising to 2.2 percent in 2005.
The International Monetary Fund last week raised its 2004 growth forecast for the bloc to 2.0 percent from 1.7 percent projected in April.