EU Business Group: Euro Exchange Rate At "Pain Threshold"

BRUSSELS (Dow Jones)--The euro's exchange rate has reached a "pain threshold" for industry, the head of the European Union's largest business lobby said Monday.

The euro on Monday traded just below $1.50. When the currency rises, euro-zone exports become relatively more expensive in foreign markets, hampering a sector considered crucial to the region's economic recovery.

"This is not good news for growth in Europe," BusinessEurope's President Juergen Thumann said in a statement following a meeting with key EU economic officials, including European Central Bank President Jean-Claude Trichet and European Commissioner for Economic and Monetary Affairs Joaquin Almunia.

Thumann, whose group represents national business federations in talks with EU institutions, including the ECB, said interest rates in the bloc "will have to be maintained at a low level for a considerable period of time."

The ECB last week held its key rate at 1.0%, but some economists warn that inflation could climb quickly following months of cheap money, liquidity injections and government stimulus spending.

Despite low interest rates, companies still have trouble finding affordable financing, Thumann said. EU companies' investment in machinery and equipment is down more than 20% since last year, he said, adding that a solution to this problem is "an absolute priority."

Thumann also warned of the danger of over-regulating the financial sector. Since the start of the financial crisis, EU law makers have pushed for stronger rules. Legislation to regulate hedge funds and create new supervisory groups in the EU is currently being debated.

"The proposals have their individual merits, but we have absolutely no idea of their overall impact on the economy," Thumann said.

-By Adam Cohen, Dow Jones Newswires; +322 741 1486; adam.cohen@dowjones.com

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November 09, 2009 08:30 ET (13:30 GMT)


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