Luxembourg - Soaring food and fuel prices are a long-term problem and Europe will have to adjust its economy to cope, European Union finance ministers agreed at a meeting on Tuesday.

"The fact of the matter is that there are very obvious signs that things are of a more long-term nature than was thought at the beginning," Slovenia's Finance Minister Andrej Bajuk, who chaired the meeting in Luxembourg, said.

The combination of rising fuel and food prices and labour shortages "are more or less permanent sources of higher inflation for years to come," added Finnish Finance Minister Jyrki Katainen.

Tuesday's meeting was officially set to discuss matters such as Slovakia's hope to join the euro in 2009, the solvency of insurance companies and VAT on insurance.

But a debate on rising food prices looked set to dominate the proceedings as finance ministers discussed whether EU financial policies could help improve the situation.

Food prices across the EU in April were an average of 7.1 per cent higher than in April 2007, almost double the overall inflation rate of 3.6 per cent, according to the EU statistics office Eurostat.

"The whole discussion should be how to see that our agricultural policy will be much more efficient (and) more responsive to market signals, and also an in-depth look at biofuels programmes and the like," Bajuk said.

Recent EU-wide protests against fuel prices, which in late May prompted French President Nicolas Sarkozy to propose freezing VAT charges on fuel, also overshadowed the meeting.

"We have to accept external shocks and we have to discuss this at the multilateral level. I hope the next G8 summit (in Japan in July) will consider this issue and will decide how to cooperate among all the countries and regions involved," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said.

But Sarkozy's proposal seemed unlikely to gain support, with ministers arguing that they should stick to a 2005 agreement not to respond to oil-price rises by cutting taxes.

"I believe that (it) is the view of many of my colleagues, that tax policies are not the appropriate instrument to deal with questions of this kind," Bajuk said. (dpa)