March 4 (Bloomberg) -- European finance ministers said they are ``increasingly concerned'' the euro's advance to a record against the dollar risks deepening the economic slowdown in the region.

European officials need to be ``vigilant, concerned,'' on the euro exchange rate, Luxembourg Finance Minister Jean-Claude Juncker told reporters as he arrived for a meeting of his European counterparts in Brussels today. ``It's clear that we look at exchange-rate developments very closely and with some concern,'' Austrian Finance Minister Wilhelm Molterer said.

The euro has risen 16 percent against the dollar in the past year and reached a record $1.5275 yesterday, threatening to damp exports just as the U.S. slowdown dims Europe's economic-growth outlook. The euro's advance may add to pressure on the European Central Bank to cut interest rates even as inflation remains at a 14-year high.

ECB President Jean-Claude Trichet, who initially declined to comment yesterday, turned back to reporters to say that the U.S. government's ``strong dollar'' policy is ``very important.''

``In the present circumstances, I consider very important what has been affirmed and reaffirmed by the U.S. authorities, including the secretary of the Treasury and the president of the United States of America, according to whom a strong-dollar policy is in the interests of the United States,'' Trichet said.

`Clearly Responding'

``Trichet was clearly responding to the currency overshooting,'' said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Plc in London. ``It's not a signal for intervention or a clear sign for policy easing just yet, but it may fast-track the debate on the ECB's Governing Council about a rate cut.''

The euro traded at $1.5220 at 6:35 p.m. Brussels time, up more than 4 percent this year against the dollar.

``Things are becoming exaggerated,'' ECB governing council member Guy Quaden told Belgian radio today. ``It is up to the relevant authorities to assume their responsibilities and particularly for U.S. authorities, who repeat that they are in favor of a strong dollar but who should reaffirm their words.''

``I'm starting to be increasingly concerned and vigilant on the euro,'' Juncker told reporters late yesterday. ``What we see at the moment is not so much a problem of a strong euro, but above all, it's a problem of a weak dollar,'' he told Luxembourg's RTL radio today.

`Problem of Connection'

French Finance Minister Christine Lagarde said ``there is a psychological threshold; the `$1.50' has a symbolic character.''

The euro rose through that level for the first time last week after ECB Executive Board member Juergen Stark said he's ``highly dissatisfied'' with euro-area inflation at a 14-year high and central-bank colleague Axel Weber said traders should shelve bets on ECB rate cuts. The dollar fell further after Federal Reserve Chairman Ben S. Bernanke told Congress on Feb. 28 that the decline is helping to narrow the U.S. trade deficit.

ECB council member Nout Wellink said Feb. 27 that the euro's appreciation to $1.45 hadn't hurt exports and the economy can cope with the higher exchange rate.

Still, Europe's economic expansion is cooling as the U.S. teeters near a recession. Euro-area growth slowed to 0.4 percent in the fourth quarter from 0.7 percent in the previous three months, with consumer spending dropping for the first time in six years, a report today showed.

`Taking Longer'

``This financial turmoil that started last August is taking longer than expected to return to a normal situation,'' Almunia told a press conference after today's meeting. ``It's starting to spill over to the real economy. The impact is starting to take a toll on the growth figures.''

Slovenian Finance Minister Andrej Bajuk, who presided over today's meeting as his government holds the EU's rotating presidency, said sovereign wealth funds have helped ease the financial turmoil by injecting capital into banks. The ministers today debated whether to seek stricter controls on the state- owned investment vehicles.

``The EU is committed to maintaining the global investment environment based on the free flow of capital,'' Bajuk said.

Countries including Germany and France have called for regulations to ensure that foreign governments don't use the funds to obtain sensitive technology or interfere in policy. That hasn't been happening, according to advocates of code of conduct rather than legislation.

``Maybe the fears are not well founded,'' Bajuk said.

``Now is the time to act, before protectionist tendencies come to the fore,'' Almunia said. ``But of course we are keen to have investment in our economies.''

To contact the reporters on this story: Sandrine Rastello in Brussels or srastello@bloomberg.net; Meera Louis in Brussels at mlouis1@bloomberg.net

Last Updated: March 4, 2008 14:06 EST