Jean-Claude Trichet, president of the European Central Bank (ECB), yesterday sounded the alarm over excessive pay deals for top European executives.

"We have to examine very, very carefully some very high, so-called packages that are not understood by the people in our democracies, whether it is on this side of the Atlantic or on the other side," Mr Trichet told the European Parliament in Brussels.

His remarks did not appear to have been spurred by any particular executive's remuneration package, but reflected concern among European Union policymakers about threats to social cohesion when competitive pressures are exerting downward pressure on wages generally.

European executive packages may not have reached the heights of their US counterparts, but Deutsche Bank chief executive Josef Ackermann, who received €11.9 million in 2005, has faced criticism in Germany, especially when announcing job cuts.

In France, distrust of a highly paid business elite was exacerbated by the €13 million severance package, supplemented by an estimated €250 million of stock options, won by Antoine Zacharias when he was ousted as chairman of the construction group Vinci last summer.

Mr Trichet combined his remarks with a renewed appeal for moderate wage settlements in the euro zone. Higher than expected wage developments posed "significant upward risks to price stability", he warned.

The ECB raised its main interest rate to a five-year high of 3.75 per cent earlier this month, and has signalled that further rises are possible in the coming months. Crucial wage negotiations are under way in the German engineering sector, which has powered the recovery in Europe's largest economy.

The ECB argues that pay settlements should reflect the high unemployment of countries such as France and Germany, as well as productivity and competitive challenges. "Moderation is of the essence at the level of the euro area as a whole," Mr Trichet said. Minimum wage deals could also threaten jobs, he added.

Mr Trichet saw higher ECB interest rates as having had a cooling effect on house prices in euro-zone states where increases have been fastest - a reference to states such as Spain and Ireland.

But US difficulties in the "subprime" mortgage sector - high-risk lending for house purchases - were unlikely in the euro zone. "We don't have the equivalent sector so perhaps we are less vulnerable," he said. - ( Financial Times service)