Euro zone unlikely to fall in recession: ECB's Gonzalez

NEW YORK (Reuters) - The euro zone is unlikely to slip into a "deep recession" as recent data suggested the economy might rebound in 2012, European Central Bank policymaker Jose Manuel Gonzalez-Paramo said on Tuesday.

A surprise upturn in the euro zone's service sector this month raised hopes the region may escape recession in 2012, even though the broader economy outside Germany is still struggling to gain traction.

"It's not even sure if we will have a recession in the end. It depends on what the first quarter (economic performance) tells us," Paramo said in an event organized by Bloomberg Link.

"All the indicators... tell that it is likely that we will see a rebound in 2012," he added, noting that the euro zone's expected growth of about 1.6 percent for 2011 "is not brilliant but not dramatically low."

Paramo also dismissed the need for quantitative easing measures, saying the ECB's three-year loans to banks might end up having a similar easing effect.

"Quantitative easing is not what we think needs to be done in the euro zone," said Gonzalez-Paramo, who will step down from his post on the executive board of the ECB in May.

The European Central Bank pumped 489 billion euros into the financial system in December in its first-ever offering of three-year loans, to help banks' funding strains amid the European sovereign debt crisis.

The objective of the ECB's operations, Gonzalez-Paramo said, was to ease volatility in sovereign bond yields to help stabilize countries' borrowing costs.

Gonzalez-Paramo said that market sentiment is improving with the "perception that pieces are starting to fall in place" in Europe.

"Everybody knows the ECB is committed to keep the market functioning, keeping banks in good health because funding to the private sector in Europe is at least 2/3 channeled through banks," he said.

(Reporting by Walter Brandimarte, Steven C. Johnson, Daniel Bases; Editing by Chizu Nomiyama)