PARIS (Reuters) – Prime Minister Costas Karamanlis said in an interview published in the French capital yesterday that he did not see inflation as a threat but suggested it was important to remain on guard. «Inflation is not, in my view, a threat, but we have to remain vigilant. We need stability. And the European Central Bank is the guarantor of that stability,» Karamanlis told Les Echos. The Greek leader said the rise in oil prices was good neither for the economy nor inflation and said it provided «strong encouragement to work more closely together on setting up a European energy policy.» Europe needed to forge ahead with the project, he said, and focus on diversifying supply, reducing dependence on oil and boosting renewable energy sources. On Greece’s work to cut its public deficit, Karamanlis said it was important to respect the rules of the stability and growth pact, set up by the founders of the euro to protect the currency from profligate public spending. «We are determined to reduce our public deficit,» the Greek prime minister said. Greece has exceeded the European Union deficit limit of 3 percent of gross domestic product every year since 2000. The European Union expects Greece to cut the deficit to 3.0 percent of GDP this year from 4.5 percent in 2005, rather than the 2.6 percent expected by the Greek government. On Monday, Greek Finance Minister Giorgos Alogoskoufis told Reuters that Europe had so far prevented high oil prices from pushing up wages and generating serious price pressures, and must continue to ensure this remains the case.