German finance minister Mr Hans Eichel has called on the European Commission to focus more on inflation as a threat to future economic stability arguing that it was not only big budget deficits that risked undermining the system.

In a weekend interview with Germany's Welt am Sonntag newspaper, he said he was open to discussing reforms to the EU Stability and Growth Pact, which suffered a setback when finance ministers suspended disciplinary action against France and Germany for high deficits last week.

But, rejecting criticism that Germany had sabotaged rules it imposed when the pact was created, Mr Eichel said high inflation rates in some euro-zone countries were a threat to the currency's stability and complained of too much focus on deficits.

"Economic policy is too complex to be boiled down to just one criterion," Mr Eichel said, adding his opinion that the pact's deficit limit of 3 per cent of gross domestic product was, by itself, an insufficient guide for making policies.

"The inflation target is very important," Mr Eichel said. "And if other countries have persistently higher inflation rates, we must look more closely at what to do about that. This is something the commission has to take into account when making its recommendations."

Prices in Germany rose 1.2 per cent in October from a year earlier, according to Statistics Office data. The euro-zone's year-on-year inflation rate was 2 per cent in October, according to Eurostat data, with Ireland at 3.3 per cent and both Italy and Portugal just below that at 2.8 per cent.

The European Central Bank aims to keep inflation below 2 per cent.

Mr Eichel again defended himself against criticism, saying Germany had obeyed both the letter and the spirit of the pact.

"It's not my fault that the stability pact is being talked about in a somewhat bad light," he said.

"But if some think the stability pact should be amended, then we should discuss it with the finance ministers - without questioning the pact itself."

Mr Eichel said he expected others to put forth proposals that would require deeper budget cuts in times of economic growth, using his standard argument that this made more sense than trying to cut spending during an economic slump.

EU monetary affairs commission Mr Pedro Solbes repeated his concern about the market impact of the Ecofin decision.

In an interview with El Pais, he said: "The nature of the pact has changed from one based on clear and precise rules, to a pact dependent on case-by-case political decisions.

"It is an error from the point of view of markets, which need to know how decisions are made, and when they can expect a decision to go in one direction or the other," he added.

Mr Solbes also rejected the view that euro-zone countries, struggling to boost sluggish economies, needed to run deficits to spend their way to a healthier economic position.

"There is a tendency to consider that the problems of Europe can be solved with more public spending. I believe that the problems of Europe are not ones (connected to) more public spending."

ECB governing council member Mr Ernst Welteke warned over the weekend that confidence in the euro could be hurt by the Ecofin move, reaffirming ECB concerns about the impact from the Brussels action.

Mr Eichel rejected fears confidence in the euro was eroded because of the moves in Brussels on the stability pact. "That's nonsense," Mr Eichel said.

"The external value is based on the long-term views of economic performance. And Europe has done a lot to catch the United States on that count."   - (Reuters)