By Todd Buell
Much progress has been made in improving economic conditions in the euro zone, but there are still challenges that need to be addressed before the crisis is over, a European Central Bank executive board member said in a speech Friday.
Yves Mersch, who sits on the ECB's six-member executive board, said recent financial market developments "confirm the credibility of the reform actions taken at European and national level."
"We can clearly see that investor confidence is slowly returning, that the persistent euro-area financial market fragmentation is decreasing and that contagion is receding," he said, according to the text of a speech to be delivered in London Friday.
He identified encouraging signs, such as national governments consolidating their budgets and the improved supervision of economic policies at the European level.
He said "substantial capital inflows" in the euro zone in recent months, receding gaps in financial conditions and the resilience of the euro zone against "adverse news" showed that confidence in the euro was returning.
Still, it is too early to say the crisis has ended, he said, pointing specifically to the challenge of reviving investment and bank lending.
"Financing the real economy via the banking channel should resume with the certainty and confidence accompanying the Banking Union's comprehensive assessment," he said, referring to the ECB's health check of the euro zone's largest banks, which it will begin supervising in about one year's time.
