FRANKFURT (MNI) - Evidence of economic and financial recovery does not change the fact that no one can say for sure when the economic and financial crisis will be over, European Central Bank Governing Council member Marko Kranjec wrote in an article for a Slovenian banking journal.

Kranjec, who heads the Bank of Slovenia, wrote during the last several weeks, for the latest issue of Bancni vestnik, that the economic crisis resulting from the financial turmoil has led to "falling output and foreign trade, increased unemployment and soaring fiscal deficits."

"In spite of optimism in some quarters and the appearance of 'green shoots', nobody really knows when the crisis will end, and what the world economy and the financial service industry will look like in the future," he said.

Among the "many lessons" learned from the crisis is that "financial markets do not automatically ensure financial stability" and must thus be "regulated and supervised," he said.

The speed with which the ECB acted to stabilize financial markets was particularly admirable, Kranjec wrote, but the various measures needed make "clear that low inflation [price stability] does not automatically guarantee financial stability."

Although fiscal policy has been instrumental in supporting private banks and buffering domestic demand, Kranjec warned that as a consequence, "fiscal deficits and public debt attained record highs, and it will take years to unwind them."

"There is an urgent need to resist demands by politicians to the banks to behave 'responsibly' and extend lending even in cases where recession has permanently destroyed business prospects of many enterprises," he said.

"Demands for more risky lending and for higher capital buffers are mutually inconsistent and do not help speed an exit from the crisis. Only judicious regulation and old fashioned banking can contribute to normalisation."