ECB's Mersch says recovery on wobbly legs

FRANKFURT Mon Jan 13, 2014 12:02pm EST

Yves Mersch, Member of the Executive Board of the European Central Bank presents an oversized newly unveiled 10 euro note at the headquarters of the European Central Bank (ECB) in Frankfurt, January 13, 2014. REUTERS/Ralph Orlowski

Yves Mersch, Member of the Executive Board of the European Central Bank presents an oversized newly unveiled 10 euro note at the headquarters of the European Central Bank (ECB) in Frankfurt, January 13, 2014.

Credit: Reuters/Ralph Orlowski

FRANKFURT (Reuters) - The euro zone economic recovery is still very tentative and fragile and is Europe's number one challenge for 2014, European Central Bank Executive Board member Yves Mersch said on Monday.

"I see the big challenge for this year in the still very tentative upturn," Mersch said in the text of a speech to be given at an Ifo Institute event in Munich. "The economic recovery in Europe still stands on wobbly legs."

Mersch also urged those countries which can afford it to invest in infrastructure.

While he did not specifically name Germany, it has faced criticism from countries in Europe and beyond for spending less on infrastructure over the past decade.

Government spending on this fell to 1.5 percent of gross domestic product (GDP) from 2 percent in 1999, and is well below the European Union average of 2.5 percent, according to the DIW economic institute.

Turning to small- and medium-sized businesses (SMEs), Mersch said that some of them suffer from bottlenecks in financing. He proposed founding a database which would assess SME credit risk.

Mersch repeated his call for increased use of asset-backed securities (ABS) as an SME financing tool.

"Robust European securitisation platforms could be a sensible addition to bank-based financing," he said.

(Reporting by Sakari Suoninen)

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