Worries that a surge in oil prices could stunt Europe's fragile economic recovery overshadowed wrangling by euro zone finance ministers today over how to tackle Italy's swelling budget deficit.
Speaking to reporters after a meeting late last night attended by the European Central Bank (ECB), the ministers dismissed any concern about inflation and instead focused on the climb in oil prices to their highest in more than a decade.
"We are following . . . oil with interest. We know that a negative evolution of oil going up could have a negative impact on our growth," Spain's Mr Pedro Solbes said. "This is a point of our preoccupation, inflation is a secondary factor."
Yesterday the ministers gave Italy, the euro zone's third biggest economy, until July to spell out how it plans to rein in a deficit that would otherwise risk breaking European Union limits - a deadline that falls after Italy holds European and local elections in June.
Today the 12 euro zone ministers will be joined by the remaining 13 EU finance ministers for the first meeting of all EU-25 finance ministers.
ECB President Mr Jean-Claude Trichet said that top central bankers were watching soaring commodity prices and welcomed Saudi Arabia's call for higher oil output to dampen prices.
But he said monetary policymakers were confident that a world economic recovery remained firmly on track, even strengthening and broadening, despite oil touching 13-year highs around $40 a barrel last week and the upswing in bond yields.
European Monetary Affairs Commissioner Mr Joaquin Almunia, attending his first euro zone ministerial meeting, said higher oil prices could generate price pressures in the coming months but he too played down their likely impact further out.