The euro zone does not risk relapsing into recession and markets are overly pessimistic about Europe's common currency, members of the European Central Bank said on Friday.

The irresponsible behavior of credit rating agencies was compounding the problem, Juergen Stark, an ECB Executive Board member, said in a Reuters Insider Television discussion.

Several members of the ECB came to the defense of the euro in appearances across Europe, where 16 countries share the common currency that came into being in January 1999.

People have to understand that the euro is (here) to stay, Mario Draghi, head of Italy's central bank and a member of the ECB's rate-setting Governing Council, said in Helsinki.

With the focus on the debt crisis that spilled out of Greece to rattle investor confidence in the broader currency area, the financial markets risked ignoring the fact that recovery was in tow even if it remained modest, another ECB board member said.

The growth outlook (in the euro zone) shows a much better performance but recovery is still not very strong, Gertrud Tumpel-Gugerell told reporters during a visit to Warsaw.

In Frankfurt, the ECB's Stark, went further, saying: It is not a crisis of the euro, it is a crisis of sovereign debt. And this crisis is not limited to the euro.

What in my view market participants do not consider in the current circumstances is the fact that economic fundamentals -- before the crisis but also during the crisis and very likely, I am certain, after the crisis -- will remain strong, he said.

Credit rating agencies, already under fire for giving high grades to products that ended up fuelling the first phase of the global financial crisis, were not helping now either, Stark said.

This sentiment is emphasized in my view by inappropriate statements by politicians around the world and is emphasized by pro-cyclical behavior of rating agencies which in my view is really irresponsible, the German ECB board member said.

The euro is poised to end the week 1.5 percent higher against the dollar, which would be its best weekly performance this year. But it has shed nearly 16 percent this year, driven lower by fiscal concerns in the euro zone.

Greece, the first euro zone country to require a rescue, is trying to slash its debt in return for a bailout that required lengthy negotiations between governments and exposed serious misgivings, notably among German voters.

Nout Wellink, head of the Dutch central bank as well as a member of the ECB Governing Council, said Europe should have stepped in to help Greece earlier, and that Athens should have been called to account earlier too.

There should have been peer pressure on Greece years ago... The whole country lived beyond its means and the public sector lived beyond its means, Wellink said.

MARKET OVERSHOOTING

Investors are now worried that banks may get into trouble because of heavy investment in the bonds of Greece and other weaker euro zone economies that are burdened with bloated debts.

Wellink noted that inflation expectations in the euro area were more firmly anchored than the United States -- which will also have to tackle a large post-recession debt but is not under the market pressure the euro zone is enduring.

Euro zone governments and the IMF have promised Greece loans of 110 billion euros over three years in return for a drastic deficit-reduction program.

They followed up on May 10 with an anti-contagion plan that could mobilize up to 750 billion euros more if needed to rescue other countries if they can no longer refinance their debts at affordable rates on the financial markets.

Stark said markets were overly bearish.

Markets are, clearly in the current circumstances overshooting, we do not deny that we have severe problems in the euro zone but they are less severe than market reaction suggests, he said.

(with additional reporting by Boris Groendahl in Vienna, Brett Young in Helsinki, Dagmara Leszkowicz in Warsaw; Writing by Brian Love, editing by Mike Peacock)

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