ECB must roll back stimulus "as soon as possible" Mersch says

FRANKFURT (Reuters) - The European Central Bank must roll back its aggressive stimulus measures "as soon as possible", although the high volume of bonds it is buying mean the withdrawal will probably take time, ECB Executive Board member Yves Mersch said on Thursday.

Mersch also warned that the prospect of relaxed fiscal and monetary policies around the world, along with more lenient regulation, as advocated by U.S. President-elect Donald Trump, risked a new financial crisis.

The hawkish rate setter said the ECB's ultra-easy policy of bond buying and negative rates was appropriate while the euro zone's recovery remained hesitant.

But he stressed the policy should be withdrawn as soon as possible, or it risked giving euro zone governments, whose bonds the ECB is buying, "wrong incentives", ultimately breaking ECB rules against financing states.

"Our measures ... were introduced as temporary measures and must be rolled back as soon as possible," Mersch told a conference in Frankfurt."

"In light of the volume of the purchase programme, that will take some time, but a prolonged deployment of our asset purchases would, for example, create wrong incentives in the financing of states."

The ECB is buying 80 billion euros ($85.86 billion) worth of assets, mainly government bonds, every month to bring inflation back up to its target of almost 2 percent.

Mersch said that euro zone inflation, now 0.5 percent, may rise to 1.9 percent in 2019.

($1 = 0.9318 euros)

(Reporting By Francesco Canepa and Balazs Koranyi, editing by Larry King)