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Europe is emerging ‘out of the woods’: OECD

As central bankers and economists gathered in the sun-kissed Portuguese town of Sintra for a forum on central banking, Mario Draghi, the president of the European Central Bank (ECB), said that the outlook for the euro zone looked brighter than it had done for the last seven years.

And Draghi was not the only one seeing some rays of light through the trees.

Catherine Mann, chief economist at the Organization for Economic Co-operation and Development (OECD), told CNBC that spiking bond yields (which move inversely to prices) was indicative of Europe "really coming out of the woods."

"The negative yields are a little overshot, a little low, but the pickup in yields I think really represents the market seeing the better data coming in for Europe and they're saying look Europe is really coming out of the woods," Mann told CNBC from Sintra on Friday.

She said that Europe "as a whole is looking a lot better." Data out earlier this month showed that the euro zone economy grew by 0.4 percent in the first three months of 2015, outpacing the U.S.'s rate of expansion.

Read MoreEuro zone outlook brightest 'in seven years': Draghi

Euro sculpture in front of European Central Bank headquarters
Martin Leissl | Bloomberg | Getty Images

"There's a range of things that need to be done in every country within Europe, each having its own unique characteristics," said Mann. "They do (however) all have the single monetary policy, which is working in the direction of providing the basis for prosperity in Europe."

She added that some countries needed to make more efforts with fiscal reforms, as well as in deregulating labor and product markets.

On Tuesday, the International Monetary Fund warned that France must make more efforts to reduce government spending and debt levels, as well as long-term high unemployment.

Read MoreFrance slammed by IMF for record-high spending

Meanwhile, international bailout supervisors are currently engaged in a lengthy reforms-for-loans battle with Greece, for instance, with pensions and labor markets among the most contentious topics.

"Within individual countries, they have challenges with regard to some regulated product markets, maybe some issues on the labor side," Mann said.

She added that the OECD would like to see further progression in resolving the issues around forming a banking and capital markets union in Europe.

Room for improvement?

Growth is picking up in the euro zone and inflation expectations have recovered since quantitative easing was launched, as Draghi highlighted in Friday's conference. But is there room for still more action by the ECB?

There are "additional things that they could perhaps do" Mann told CNBC, highlighting the possibility of packaging up small business loans as asset-back securities (ABS).

"There are a range of creative things that they could do, but they want to see how this works first before they start layering off on a whole other set of instruments," she said.

Mann told CNBC that the rebound in bond yields could reflect a belief in markets that there was "better data coming in for Europe," such as Friday's German business climate IFO index for May, which came in slightly higher than expected. Mann added that she was looking forward to seeing more good data in future months.