The European Central Bank's Ewald Nowotny urged euro zone leaders to agree a pact on competitiveness and said it would be fair to fine tune aid given to countries who have worked hard to repair their finances.

The pact on competitiveness, which Germany is demanding as a quid pro quo for a broadening of the European Union's bailout mechanism, will be the top item on the agenda at a summit of euro zone leaders on Friday.

Its adoption would be the next cautious step in governments' year-long efforts to quell the region's debt crisis.

"What is important to us as central bankers is that this package comes at all," Mr Nowotny, the head of the Austrian central bank and a member of the ECB's governing council, told Austrian radio in an interview broadcast today.

Mr Nowotny said differences in competitiveness lay behind financial imbalances and that it would be sensible to coordinate policy on taxes, wages, technological development and fiscal policies. "That means you have to respect limits on public debt," he said.

Asked about the prospects for extra help for countries like Ireland and Greece that already won foreign assistance to handle their debt crises, he said: "If you have the feeling that these countries are really trying, that structural change is coming, that these problems will not resurface in two years, then it can make sense to say you can fine tune things. If this is not the case there is no reason to change anything."

Pressed on whether this meant countries that do their homework could be rewarded with additional help, he said: "Then at least it is sensible to consider how to shape the programme so that it is most certain to lead to success."

Asked whether it would be fair for struggling countries to reschedule debt and have private investors share the pain, he said: "That is not the view of the European Central Bank."

He reiterated he was not a candidate to succeed ECB president Jean-Claude Trichet, whose term ends this year.

"I have said on various occasions that I am not available for this due to personal reasons," he said.

He acknowledged that financial markets had in the past underestimated sovereign debt risks. "It is important to send the message that risks vary and this must be reflected in interest rates and prices."

Reuters