EUROPE - Jean-Claude Trichet, the president of the European Central Bank, flagged up the challenge of population ageing and pension systems in the bank’s monthly press conference on monetary policy.

“With regard to both fiscal policies and structural reforms, the governments and institutions of the European Union will have to confront many important challenges in the course of 2005,” Trichet told the meeting in Frankfurt.

“Foremost among these challenges is the need to strengthen public finances by correcting excessive deficits swiftly and returning to a path of vigorous fiscal consolidation.

“Moreover, throughout the European Union there is a need to address the considerable challenges that population ageing poses to existing pension and social security systems.”

He added that there was a consensus in the international community that structural reforms are of the “essence in the euro area”.

“It is the appropriate way to elevate the growth potential, and our contribution to global growth would be to elevate the growth potential.”

Trichet was speaking after the ECB’s governing council decided to keep interest rates unchanged.

He said: “While short-term inflationary pressures persist, they have recently diminished somewhat, mainly due to the decline in oil prices from the peaks seen in October.

“At the same time, there is currently no significant evidence that underlying domestic inflationary pressures are building up in the euro area.”