By Tony Barber in Brussels


European business leaders warned on Friday that the euro would not survive in the long term if the European Union failed to develop powerful political institutions to balance the European Central Bank.

“There’s an imbalance between the central bank’s power and the power of the European institutions,” said Ernest-Antoine Seillière, president of BusinessEurope, the leading pan-European business association.

“We believe the euro will not survive in the long run in the absence of some kind of political support, by which we mean the eurogroup,” he said, referring to the 15 eurozone finance ministers who at present hold formal meetings once a month.

Mr Seillière was speaking to reporters as the euro continued its record-breaking rise on foreign exchange markets, touching another all-time high of $1.5347.

The euro also reached a record high on Friday against the British pound.

Mr Seillière’s organisation has made no secret of its desire to see a stronger role for the eurogroup in co- ordinating the eurozone’s economic policies.

However, his comments were particularly timely on account of the EU’s growing concern about the euro’s rise against the dollar and Asian currencies such as the yen and Chinese renminbi.

“We have been calling for the eurogroup to have real potential, power and authority when it holds its meetings. We know Prime Minister [Jean-Claude] Juncker has done his best up to now, but we ask for more,” said Mr Seillière, referring to the Luxembourg leader who chairs the eurogroup’s meetings.

“Real co-ordination of national economic policies in the euro area is essential.

“When will we see the head of the eurogroup join with his opposite numbers in Tokyo, Beijing and Washington and open up the discussion among the major actors in the world economy in order to stabilise the world monetary system?” Mr Seillière asked.

“I’m not saying it will be possible next month, but it must be done. Otherwise you’ll see the euro at $1.80 and no action,” he added.

Mr Seillière was not questioning the ECB’s legally enshrined right to independence from political interference.

Rather, he was making the point that, under the arrangements that have governed the EU’s monetary union since 1999, the central bank was the only truly powerful eurozone institution.

This made it difficult for the eurozone to make its weight count in global monetary and economic discussions.

Mr Seillière said the euro’s strength was unquestionably making life hard for some European export sectors.

“When we went over $1.40, we said we were at the pain threshold. Above $1.50 we say it’s alarming,” Mr Seillière said.

However, he stressed that business leaders appreciated that the euro’s strength was helping to contain the inflationary impact of soaring oil and gas prices.

He said they also understood that the key to solving Europe’s competitiveness problems lay in business innovation, better education systems, labour market reform and other policies, and they had no intention of making a scapegoat of the euro.

“They do not overestimate the importance of the euro’s strength,” he said.