The euro zone economy has clearly improved over the past year but there is still work to be done to haul its southern economies out of trouble, European Central Bank policymaker Ewald Nowotny said on Thursday.

He admitted to nervousness around over an inconclusive election in Italy this week but said it should not be overdone.

"Of course everyone's a bit nervous. (...) One should keep things in perspective. I do not think there will be fundamental change in the politics in Italy because there are just economic necessities that you have to follow," he said.

"There was a bond auction yesterday that went quite well. One shouldn't overdo it."

(Reporting by Patrick Graham; Editing by Toby Chopra)