Published: Thursday, 22 Oct 2009 | 3:14 AM ET

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It is unlikely that the euro zone would fall back into recession soon after exiting it, European Central Bank Governing Council member Axel Weber said on Thursday.

He also said there were no risks to price stability in the policy-relevant medium-term horizon.

"There are several factors, in the euro zone as well as in other major economies, that point to a fairly benign outlook and that make a double-dip recession very unlikely," Weber said in the text of a speech to be given at the Israeli Presidential Conference.

He said continuing economic stimuli, improvement in confidence and absence of inflationary risks were contributing to the improved outlook. Deflationary fears have all but disappeared, Weber also said. He also said the global economic turnaround after the freefall was striking.

"We have seen a remarkable stabilization around the world in recent months," he said. "It is safe to say that we have overcome the worst." But Weber warned of undue economic optimism. "Forecast risks are still elevated, and there is no reason to be overly optimistic given the fragility of the recovery."

Weber, who also heads the German Bundesbank, also said now was not the time to exit from measures employed to fight the financial crisis.

"Given the macroeconomic outlook, there is surely no need to rush for the exit at the current juncture," he said. "However, to stabilize expectations and to safeguard public confidence it is essential to develop a credible exit framework now."

The ECB has cut its main refinancing rate to a record-low 1.0 percent, offered unlimited liquidity to banks and started a 60 billion euro covered bond purchase program to aid the ailing economy.

The ECB's exit and monetary policy stance was determined by risks to price stability, Weber said, but added inflation was not a concern right now.

"Risks to price stability ... are fortunately currently not present at the policy-relevant time horizon." Inflation in the euro-zone has been negative in recent months and was -0.3 percent year-on-year in September.

ECB President Jean-Claude Trichet has said he expects inflation to turn positive in the coming months. Weber also said the ECB's non-standard instruments allow for a flexible exit and can take financial market fragility into account, if needed.

"I am fairly confident that monetary policy in the euro area will manage an orderly exit," he said.

Turning to financial markets, Weber said market conditions have improved, but there could also be setbacks. "Market conditions ... have improved significantly in recent months, in fact even more so than the real economy, but the situation is still fragile and temporary backlashes are likely," Weber said.

Global imbalances must be reduced to achieve sustainable long-term growth, he also said, but added this should not be done by propping up demand in countries with current account surpluses.

Rather, clogged up adjustment channels, including mandated foreign exchange rates, should be looked at, he added.

Weber also said governments should start their fiscal exit as soon as the recovery has firmed up. "Which means no later than 2011."

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