The president of the European Central Bank (ECB), Jean-Claude Trichet, has suggested that interest rates could rise if EU leaders agree to weaken the Stability and Growth Pact at a summit in Brussels next week.

Mr Trichet told the European Parliament's Economic and Monetary Affairs Committee that talks on reforming the pact needed to be brought to "a convincing conclusion" that would safeguard fiscal discipline.

"The credibility of the excessive deficit procedure as a means to deter and correct excessive deficits needs to be fully preserved," he said.

"This is necessary in order to anchor expectations of fiscal discipline, which is fundamental not only for macroeconomic stability and cohesion in the euro area but also for enhancing confidence and fostering growth prospects in all member states."

Mr Trichet added that if budget discipline slipped as a result of a weakening of the pact, the ECB would act to rein in inflation. "Everybody knows that if we would need an increase of rates, we would do that without hesitation," he said.

During a nine-hour meeting in Brussels last week, euro zone finance ministers failed to agree on how to reform the pact. They will meet again on Sunday in an effort to agree a reform package in advance of next week's summit.

Mr Trichet said that, whatever the outcome of next week's talks, the ECB would ensure that inflation remained low.

"Our life will be totally different if the result is a good result or if it is a bad result. Our responsibility will be exerted in a different environment I think that the credibility of the ECB might play a role in convincing markets that they can trust us whatever happens in the realm of the Stability and Growth Pact," he said.