European Central Bank president Mario Draghi has said the bank has cut its growth outlook for next year.
But he added that a gradual recovery should take hold by the end of 2013.
Mario Draghi said the ECB now sees the euro zone economy shrinking by 0.3%. That is the midpoint of the forecast range for between -0.9% and +0.3%.
Previously the bank had projected euro zone growth of 0.5%
Earlier, the European Central Bank held its main interest rate at a record low of 0.75% today, holding off any further policy easing while it assesses the economic outlook and waits for the chance to use its new bond-purchase programme.
The ECB wants to transmit its low interest rates to all corners of the euro zone - where market interest rates vary greatly - and aims to do so by pushing down sovereign bond yields with its new bond-buy programme.
But it cannot use the plan to buy the bonds of Spain - first in line for support - until Madrid requests a bailout, a precondition for the ECB to intervene with the new programme, dubbed Outright Monetary Transactions.
The ECB left its main rate on hold for the fifth month in a row. It also left the interest rate on its deposit facility at zero per cent and held its marginal lending facility - or emergency borrowing rate - at 1.5%.
Mr Draghi said the bank's governing council had discussed interest rate cuts, but said the consensus view was to leave them alone at this time.
"Economic weakness in the euro zone is expected to extend into next year," Mario Draghi said at the ECB monthly news conference. "A gradual recovery should start later in 2013."
On Ireland, Mr Draghi said that he welcomed yesterday's budget, and said it was a reaffirmation of the successful commitment of the Government in restoring sound economic, fiscal and more broadly structural conditions.
On the issue of the Anglo Irish Bank promissory notes, the ECB boss said that while there is ''plenty of goodwill'' towards Ireland, the bank can not undertake any agreement that would be viewed as monetary financing.
Draghi expects deal soon on banking supervisor
Mr Draghi also said today he expects European Union leaders to reach a deal "soon" on making the ECB the euro zone's central banking supervisor.
EU officials failed to reach agreement on the proposal at a meeting earlier this week. Germany wants the new supervisor to oversee only the biggest banks, while France wants it to look after all 6,000 euro zone financial institutions.
Draghi said he was "confident we will soon have an agreement" because "the benefits are not disputed."
The single supervisor is aimed at keeping bank failures and bailouts from hitting the finances of national governments. That risk has been a key driver of Europe's debt crisis.
In their first forecasts for 2014, ECB staff forecast GDP growth of 0.2 to 2.2%.
The December macroeconomic projections also lowered forecasts for inflation next year to between 1.1 and 2.1% from a previous forecast of 1.3 - 2.5%.
Little surprise at no rate cut
Austin Hughes, Chief Economist with KBC Bank said there was little expectation that the ECB would cut interest rates at today’s policy meeting.
"There was no surprise when the announcement came that they were left unchanged," Austin Hughes said.
"However, this decision may have been a little bit closer than generally thought. New ECB projections show a notably poorer outlook for activity and a lower inflation rate than previously envisaged. In addition, Mr Draghi acknowledged that a rate cut had been discussed as had the more contentious issue of a negative deposit rate," he added.