G8 finance ministers to grapple with oil inflation

PARIS (Reuters) - High oil prices will be the main issue discussed by finance ministers of the G8 economic powers in Japan at the end of this week but there is no quick fix in sight, a French finance ministry official said on Tuesday.

The official was speaking ahead of a meeting on Friday and Saturday of G8 countries -- the United States, Japan, Germany, Britain, France, Italy, Canada and Russia -- in Osaka, Japan.

Host country Japan has invited China and India to a dinner where the G8 countries are also expected to discuss the threat from high fuel and food prices, with others such as Thailand, South Korea, Indonesia and Australia, the official said.

The participation of China and India, key because they are two fast developers that account for much recent oil demand growth, had still to be confirmed, said the official, speaking to a small group of reporters on condition of anonymity.

French Finance Minister Christine Lagarde would highlight the need for developed countries to keep reducing dependency on oil, the need for more transparency on oil stocks and reserves and the need for greater output.

She also plans to press for a phase-out of massive fuel subsidies in emerging market countries such as Indonesia and China, the official said.

On prices for food commodities, many of which have doubled in the last two years, International Monetary Fund chief Dominique Strauss-Kahn was expected to air some thoughts on such ideas as the creation of a "rapid reaction fund" at the IMF to address food crises.

FINANCIAL CRISIS

The G8 ministers are also expected to get a readout from the so-called Financial Stability Forum after G7 finance ministers endorsed a long list in April of FSF proposals for reform of the way banks and financial markets do business.

The FSF, whose head Mario Draghi, also head of the Italian central bank, will be in Osaka, was expected to produce a progress report, the official said.

One area where progress was slow, the official said, was on changes in international accounting standards, and that should be broached at the meeting, the official said.

Japanese proposals for a technology fund to promote green, or environmentally friendlier technologies, would also be discussed and some, but not all G8 countries had already said they were ready to commit money.

France was not yet sure and wanted to discuss with others, and notably the United States, whether this fund would overlap unnecessarily with other initiatives, said the official.

The Osaka meeting is a gathering of the G8, which comprises the G7 finance ministers plus the finance minister of Russia.

Exchange rates, an issue broached when G7 finance ministers meet along with their central bankers, would not be a subject of official discussion or feature as such in an end-of-meeting communique in Osaka, the official said.

(Reporting by Brian Love; editing by Stephen Nisbet)