THE euro area is out of the danger zone, but to prosper it must restructure its financial sector, foster growth with new business models and avoid protectionism, a top European Central Bank policymaker said.
In a speech to the Asia Europe Economic Forum in Beijing, which was entitled, "Lessons from East Asia for the euro area", Benoit Coeure said the European bloc was at a crossroads.
"In one direction lies the Japanese experience, and in the other direction that of emerging East Asia," he said in the text of the speech. "Europe has emerged from the danger zone. It's time for us to get our act together, to reform and to grow."
The ECB's plans to assess 128 top euro zone banks before taking over supervision of banks in a year's time aim to increase transparency, identify "the necessary corrective actions", and build confidence in the sector, Coeure said.
"With such steps, and provided that sources of capital are clearly identified, including public backstops when private sources have been exhausted, I firmly believe we can put the banking system on a sounder footing," he added.
Wary of a lopsided banking union - with a common supervisor but without a common backstop for banks - the ECB has urged governments to agree on a strong single resolution mechanism (SRM) to salvage or wind down banks in trouble.
Turning to the broader euro zone economy, Coeure said countries should prioritise public spending towards investment that boosts productivity and ensure that labour and goods market are flexible to promote investment in new business models.
"Europe needs to avoid protectionist temptations and calls for re-nationalisation," he added.
"Europe should remain open to the world. Further progress on bilateral or regional free trade agreements and cooperation in implementing the new financial regulatory standards are the best signal in this respect," he said.