The euro zone economy is not out of the woods yet, UBS Chairman Axel Weber told CNBC at the World Economic Forum in Davos on Wednesday, pointing to the Italian elections and Spain's ability to tap financial markets for funding as significant risks.
"Sovereign spreads have come down, they look much more sustainable. But of course they're subject to political concerns. This year there are two, or three, major political events in Europe that could lead to a challenging environment," Weber, who is also a former head of the German central bank, said.
"Take the Italian elections, the debt ceiling across the Atlantic, or whether Spain can continue to have market access at the current rate given the sizable amount of debt they need to reissue in the market."
"Any indecisiveness about some countries, like Italy on the way forward, any lingering doubt that the core will stand behind the periphery will cause a challenge in the environment, the current risk-on environment could easily switch into a risk-off environment," Weber added.
He also cited the German elections as a risk for Europe.
"We'll see how prepared German taxpayers are to back the system up. This will not be unanimous, there are those who will voice their concern during the elections, basically showing that Germans are still divided over this issue. And again, in such an environment, as Europe depends on German taxpayer support, that could cause the market to switch from a benign risk perception to a much more pronounced of risk in Europe."
(Read More: Why the Euro Zone Crisis is Over... Till September)
China would continue to play an instrumental role in driving global economic growth, Weber said, and that would help other economies move from the middle of their growth range "to the upper part of that growth."