DAVOS, Switzerland Encouraged by the euro zone's resilience last year in the face of severe doubts about its survival, some outside investors have snapped up assets in the strongest corners of the region.
Yet even the most enthusiastic euro proponent would concede there's plenty more to do to strengthen the currency bloc. Fundamentally, there's a need for economic growth to start to revive for many investors to risk a more decisive push into bonds, equities or more tangible assets in a swathe of crisis-hit countries.
"After last year, one should consider that the likely outcome for Europe in the next decade is 1 percent annual growth," said Ontario Teachers' Pension Plan CEO Jim Leech, who is not planning to venture into Europe's "wine-belt" countries such as Spain and Italy for investments.
"It's going to take a long time to mend itself. One has to look (instead) at emerging markets," added Leech, whose fund is looking to open an office in Hong Kong and hopes to team up with local players for large China transactions.
Go back a year and the prospect of a disorderly Greek exit, leading to the euro's possible implosion, was the central subject of debates between bankers, investors and policymakers meeting in Davos for the annual World Economic Forum.
Twelve months on, the euro is still standing and has regained ground against the dollar and the Swiss franc, after European Central Bank head Mario Draghi showed in the summer he was determined to prevent a breakup of the 17-nation currency.
"The single biggest factor that has contributed to changing the investment outlook is obviously Mario Draghi and the stance of the ECB," said David Novak, a partner with Clayton, Dubilier and Rice, one of the oldest U.S. private equity firms.
"Knowing that a backstop is there has led to a level of stability in the market," said Novak, whose firm acquired a significant interest in British discount retailer B&M last year.
Novak, who expects 2013 to be a transition year for Europe, said his firm would continue to look for investments in businesses with strong exports located in Britain and northern Europe. But more evidence of long-term stability was needed to make deals in southern Europe attractive, he added.
The ECB's pledge to buy unlimited quantities of bonds of weaker nations has led to the near-halving of Italian and Spanish borrowing costs from their euro crisis peaks, with some fund managers dipping back into hard-hit sovereign bonds after months of absence.
Herbert Scheidt, chairman of Swiss private bank Vontobel, said Draghi's action had been a potent antidote to the bets many hedge funds had been placing on the collapse of the euro and was a stabilising factor in the market.
But the prospect of prolonged, austerity-led stagnation in the region is making assets in places like Italy, Spain, Germany, Portugal and Greece still unpalatable for many long-term overseas investors.
Bankers and investors agree these countries need to continue to push through painful labour and welfare reforms to improve the region's competitiveness.
But some are skeptical about politicians' ability to use the breathing space the ECB has offered them to lead a return to a path of growth, with many saying economic retrenchment in these countries looked too aggressive.
"Even if Greek bonds might have generated 80 pct for you last year, it didn't change anything on the unemployment front where 50 percent of young people are unemployed," said Alexander Bazarov, a member of the management board and vice president of Sberbank (SBER.MM), Russia's biggest bank.
"I don't see any major appetite among Russian businessmen for investing in the European Union. An hotel here and there. But there are no major, mainstream deals," Bazarov said.
While some investors, especially in North America, are wary of moving back decisively into Europe, others will be well aware that fortune can favour the brave.
Davide Serra, a founder of hedge fund Algebris, is placing his bets on being long in 2013 on bank and insurance stocks, much shunned by investors over the past five years of crisis.
And some cash-rich players from Asia and the Gulf with a longer-term perspective have been actively looking for bargains in what remains one of the richest regions of the world.
These investors are shunning bonds and equities and rather looking to snap up quality companies at attractive prices.
"We see opportunities both in Europe and the United States. Despite the crisis these are the most developed, most trusted and most liquid markets of the world," said Scott Freidheim, Europe CEO of Investecorp, a manager of alternative assets for Gulf investors.
"We don't dismiss the headwinds that Europe still faces, but it creates opportunities," said Freidheim, who bought Spain's Esmolglass in the summer and is targeting other private companies with a strong exposure to export markets.
Even though many European companies are on average worth around the half of levels seen before the subprime crisis, some of these investors say the best buying opportunities may already be over.
"Opportunities are everywhere in Europe, but at the end of the day it has to be priced right," said Chen Feng, chairman of Hainan Airlines Group (600211.SS), which bought 48 percent of French airline Aigle Azur in October.
"If you can't agree on the price, the deal is not going to happen, no matter what the economic situation is like ... If somebody thinks that everything is fine now and wants to price higher than what the market can pay, then obviously there's going to be no deal."
So far then it's mainly the most risk-tolerant buyers who have bought into euro zone assets. For everyone else, there has to be a clearer sign that economic growth is returning before they open their wallets.
"I think we are on the way up," said Charles Dallara, Managing Director at the Institute of International Finance. "But if we do not pick up the slack in the real economy, then the market will turn." (Additional reporting by Dmitry Zdhannikov and Kelvin Soh; Editing by David Holmes)