Leaders warn on euro zone growth forecast

By David Milliken and Gavin Jones

VALLETTA/ST. JULIAN'S, Malta (Reuters) - The euro zone economy could slow more than previously forecast, a policymaker said on Saturday, as other EU leaders voiced worries about the weak U.S. economy and the strong euro currency.

Speaking on the sidelines of ceremonies to mark Malta's January 1 adoption of the euro, Luxembourg's Prime Minister Jean-Claude Juncker told reporters: "The European Commission is considering we could have (euro zone) growth of 1.8 or 1.9 percent."

The Commission's latest forecast, in November, was for 2.2 percent growth in 2008.

Juncker, who chairs the Eurogroup of euro zone finance ministers, declined to be drawn on the strength of the euro.

Some companies and politicians say the currency's appreciation is making it harder for the region's exporters to compete, adding to the drag on growth from a sharp U.S. economic downturn.

But France's EU affairs minister Jean-Pierre Jouyet told Reuters the euro was rallying too fast, and came close to renewing French criticism of interest rate hikes from the European Central Bank's last year which have increased the attractions of buying the currency.

Despite the rate rises, global food and fuel price increases have pushed euro zone inflation above the ECB's target ceiling, and Jouyet suggested the Eurogroup of EU finance ministers should "see if the (ECB's) inflation target is appropriate in the euro zone".

Although a global credit crisis has persuaded the ECB to keep interest rates on hold at 4 percent since last June, hawkish comments from ECB policymakers have spurred the euro's long-running rally against the dollar, especially since the U.S. Federal Reserve began to cut its benchmark rate in September.