FRANKFURT, July 1 (Reuters) - The euro zone’s economy may well avoid the most pessimistic scenario envisaged at the start of the pandemic but it still faces risks from virus mutations, the European Central Bank’s President Christine Lagarde said on Thursday. “The improved economic outlook on the back of rapid progress in vaccination campaigns has reduced the probability of severe scenarios,” Lagarde told the European Parliament. “Of course, the nascent recovery still faces uncertainty also due to the spread of virus mutations.” She was speaking in her role as the chair of the European Systemic Risk Board, the European Union’s financial stability watchdog. (Reporting by Francesco Canepa; Editing by Alison Williams) Our Standards: The Thomson Reuters Trust Principles.