EU business lobby urges caution on rate hikes

Strasbourg, France, May 17 | Updated: May 18 2006, 05:30am hrs
The European Central Bank should think twice before raising rates again as EU growth shows no sign of hitting levels necessary to sustain the blocs needs, a top business leader said on Wednesday.

The European Central Bank is widely expected to raise euro zone interest rates in June, but Ernest Antoine Seilliere, president of EU business lobby UNICE, said it was unclear if the economy could absorb more hikes without growth being hit. We as representatives of the business community tell the central bank be careful, our growth is fragile, Seilliere said.

ECB rate hikes up until now have been digested by the economy without damaging consequences as business confidence remains generally buoyant, he told Reuters in an interview during a visit to the European Parliament. A rate hike would have little impact on booming economies such as Ireland and some of the new member states, but countries like France were fearful as their economies were still fragile, he said.

Inflation is largely due to higher oil and gas prices rather than any inbuilt process in the economy, he said. We are still very concerned that at some point there may be a weakening of the growth perspective. We are worried that the rhythm of growth in Europe is much slower than in most parts of the world, Seilliere said.