European Central Bank president Mr Wim Duisenberg said all euro zone member governments must maintain their commitments to balance their budgets within agreed time limits.
"It is vital that all member states maintain a medium-term perspective in compliance with the framework of the stability and growth pact," he said.
"The member states concerned must honour the commitments made to achieve balanced budgets by 2003 or 2004.
"Moreover, governments are encouraged to push ahead with reforms relating to the size and structure of public expenditure and revenue, which will also create room for further tax cuts and absorb the fiscal costs of population aging."
Mr Duisenberg also said the ECB saw inflation remaining "very close" to its 2 per cent ceiling in 2003, but that the stronger euro may help ease inflation pressures.
"If the recent appreciation of the euro - which is very welcome I must say - persists it will contribute to contain the inflation expectations and the forecasts."
He said the current level of the euro was not an impediment to growth or euro zone exports.
AFP