AMSTERDAM (AFP) - The head of the European Central Bank voiced renewed opposition to any moves that might make it easier for eurozone members to breach their 1997 Stability and Growth Pact.
ECB president Jean-Claude Trichet, addressing a conference on the euro, also warned that persistently high public deficits in the eurozone could lead to higher interest rates while dampening growth and employment.
He said the bank could find "common ground" with the European Union executive commission on reforms to strengthen the capacity of the pact to prevent breaches of its stipulations.
The pact in its most controversial section requires that eurozone members to hold their annual public deficits to a maximum three percent of gross domestic product or face financial sanctions.
The two largest eurozone countries, Germany and France, have repeatedly failed to honor the deficit ceiling but have escaped punishment. Their experience has prompted calls from the commission for some of the pact's stipulations to be eased.
But Trichet on Tuesday reiterated the ECB's opposition to any relaxation in the definition of cases where countries can violate the deficit ceiling and escape sanctions.
"In this respect, the... regulations of the pact are appropriate in their current form and in our view should not be changed," he said.
EU finance ministers are currently debating a European Commission proposal to weaken the definition of the pact's so-called "exceptional circumstances" to include periods of protracted slowdown.
Ministers are due to make a final decision during Luxembourg's presidency of the EU in the first half of next year.
Elsewhere in his remarks, Trichet told the conference that non-inflationary growth required fiscal soundness, in the absence of which "price stability can only be maintained at a higher cost in terms of interest rates, and therefore lower growth and employment."
He called on the EU to accelerate the pace of structural reforms agreed upon at a summit in Lisbon in 2000 to realize its growth potential.
"It's time for the EU and its members to translate its words into actions," he said.
He noted the gap between US and EU growth rates, saying that "we have the sentiment that this is due to the absence of structural reforms."
He acknowledged that EU countries would need "a lot of courage and a lot of leadership" to implement the reforms but said economic theory and empirical evidence showed the benefits that would be reaped.
"It is therefore imperative to make it clear to the public that, if governments and social partners deliver those reforms, the net benefits will be significant for the public at large," he said.