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No straightforward recovery for Europe: UBS's Axel Weber

Friday, 21 Feb 2014 | 2:22 AM ET
Europe will not see 'straight line' recovery: UBS's Weber
Friday, 21 Feb 2014 | 1:10 AM ET
Axel Weber, chairman of UBS, says Europe's growth will not be straightforward.

Europe's recovery this year will not be straightforward, according to Axel Weber, the chairman of UBS, who warned against complacency in the euro zone with banking stress tests and anti-EU sentiment waiting to derail modest growth.

"What we will not see is a straight line recovery where growth will continue to strengthen in a pretty monotonous fashion," he told CNBC Friday. "That's not what we're likely to see."

(Read more: UBS chief warns of 'huge volatility' as profit jumps)

With elections this year in several European countries, Weber spoke of the potential for a rise in anti-EU sentiment, with national discussions focusing on economic problems in the bloc. While European governments continue to form closer bonds, fringe political parties have also seen a rise. Current polls point to gains for Eurosceptic groups across the continent, including for parties such as the U.K. Independence Party and the Party of Freedom in the Netherlands.

Weber said we were currently witnessing a strengthening of anti-European forces at the democratic level, adding that elections this year would bring to the fore these issues.

Der Chef der Bundesbank Axel Weber ist am Dienstag, 21. Maerz 2006, in Frankfurt am Main auf dem Weg zur Bilanzpressekonferenz. (AP Photo/Michael Probst) --- Axel Weber, head of the Germany's Bundesbank, arrives for the annual balance press conference in Frankfurt, central Germany, Tuesday, March 21, 2006. (AP Photo/Michael Probst)
Michael Probst
Der Chef der Bundesbank Axel Weber ist am Dienstag, 21. Maerz 2006, in Frankfurt am Main auf dem Weg zur Bilanzpressekonferenz. (AP Photo/Michael Probst) --- Axel Weber, head of the Germany's Bundesbank, arrives for the annual balance press conference in Frankfurt, central Germany, Tuesday, March 21, 2006. (AP Photo/Michael Probst)

Much of the anger is a direct result of the economic crisis, which has forced debt-stricken governments to impose tough austerity. To prevent large banks that fail from dragging down national governments that try to fail them, European leaders are now creating a "banking union".

One of the first steps on this ladder has been an asset quality review by the European Central Bank, which began in earnest in November. Weber said that it is set to expose difficulties for some European lenders. The stress tests will examine banks' leverage rations, their bad assets and exposure to outside risks.

(Read more: Recovery in euro zone business activity loses steam)

"I think it's pretty clear that in this stress test scenario and the asset quality review not all banks in Europe are equally strong," Weber said.

"Europe is not completely done with the restructuring of its banking sector and I think this stress test is an opportunity for doing that."

It has the risk that maybe some of the banks will come out quite weak and markets will retreat from these banks, Weber added.

The euro zone economy grew faster than expected in the fourth quarter of 2013 amid signs of a narrowing gap between the region's strongest and weakest members. Official data, published by Europe's statistics agency Eurostat last week, revealed that the economy of the 18-country group that uses the euro expanded by 0.3 percent over the period compared with the previous quarter -- above analyst forecasts of 0.2 percent.

Following the financial crash of 2008, European nations have been busy restructuring and rebalancing their economies. Substantial sovereign and bank debt led the euro zone to fall into a prolonged recession in 2011 as the extent of its problems were revealed.

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