European Central Bank vice-president Lucas Papademos said there should not be any negative economic consequences from the loosening of the stability and growth pact's fiscal policy rules if the reformed pact is implemented rigorously. If the reformed pact is implemented rigorously, "there should be no adverse consequences for growth and stability", he said. But he said there is a risk that the increased flexibility in the pact's so-called "corrective arm" might lead to a more lenient application of its excessive deficit procedures. The corrective arm of the pact is meant to punish governments which run excessive deficits. Papademos said sound fiscal policies are fundamental to the success of economic and monetary union and warned that the ECB will do whatever is necessary to control inflation if deficits run too high. "For its part, the ECB will not waiver in its commitment to delivering price stability," he said. Papademos said financial markets have so far been slow to react to the euro zone's worsening fiscal situation. "Market interest rates may not have responded sufficiently to the fiscal situation," he said.