What to do if the PO is a member of the team?

The PO is a member of the actual Scrum Team. 

I think you meant to say the development team. And it's not recommended.

I think it takes a very special person to act as a Dev team member and a PO. It's not impossible but these are both very demanding positions so if 1 person is working as Dev and PO, both areas of responsibility will suffer. 

The easier (though still not recommended) flex role combos revolve around the SM; SM/Dev or SM/PO. 

I have done my fair share of Agile transitions, and always was "blessed" with a PO that was actually the voice of the business.

Is it true that, in the present case, the PO is not the voice of the business? What forces or considerations have led to the current PO occupying this role?

Can the designated PO (dev team member) get completly rid of development tasks? Does he know the business enough to maximize the end-users value?

Where in the organizational chart the Product Owner is positioned is not so relevant. As the Scrum Guide states “for the Product Owner to succeed, the entire organization must respect his or her decisions.” So it is crucial that business accepts the PO as their spokesperson.

The PO needs enough time to discuss with stakeholders involved to identify the “goals and missions” relevant to the product. And from there to work down all the way to a level of individual features making it into the product backlog. 

That is usually a demanding job and rarely leaves time to do development work. Still some specific development tasks might be done by the PO, e.g. work on a User Guide or other user specific documentation. That depends on the business you are in.

Jonas, am I right in assuming you are the Scrum Master? If not, this is a matter where the Scrum Master should get involved.