If savings are to be effectively directed towards supporting resident firms, action must be taken especially on the supply side of financial instruments. This would improve the likelihood of attracting foreign investment, thereby also reaping the benefits expected to arise from the development of a truly single capital market in the European Union. Some modest progress has been made recently.
Short-term funding markets are functioning more normally, corporate bond issuance has been strong, and activity in some previously moribund securitization markets has picked up. Stock prices have partially recovered, and U.S. mortgage rates have declined markedly since last fall. Critically, fears of financial collapse have receded substantially.