The euro's appreciation on the foreign exchanges poses the most immediate risk to economic recovery in the dozen countries that share the currency, a survey showed today.
European business group UNICE said its twice-yearly survey of economic prospects showed businesses had revised upwards 2004 growth forecasts for the euro zone to 1.9 per cent from 1.7 per cent and were looking for growth of 2.2 per cent in 2005.
"The most immediate cause for concern is the possibility of a further appreciation of the euro against the dollar," it said.
"The current volatility in the foreign exchange markets and the rapid appreciation of the euro is seen as one of the main risks to the nascent economic recovery," it added.
The euro's exchange rate against the dollar was considered too high by all euro zone respondents when they were surveyed in February - a month in which the euro averaged about $1.2670, UNICE said.
The survey was compiled from responses from UNICE's national member federations, such as the Confederation of British Industry, Germany's BDI, France's Medef, and Italy's Confindustria.
Those surveyed in France said a euro rate above $1.10 would significantly hurt the European economy while German and Greek ones put the threshold at $1.20. Those polled in other euro zone countries put it at $1.30 or higher.
Respondents from five of the 12 euro zone countries expected the euro would by August be trading at or above the pain threshold they had cited for the European economy.
The persistence of international tensions and the possibility of new terrorist acts were also commonly quoted risks, with the latter being cited even by those who responded before the Madrid bombings of March 11th.