Economic output among the euro zone countries will contract this year and it will be 2014 before we start to see solid recovery take hold, the latest forecast from Ernst & Young predicts.
Ernst & Young’s euro zone forecast for Spring says that despite economic growth across the euro zone picking up in the second half of the year, an overall decline of 0.5% in GDP is expected for 2013.
This will be followed by sluggish growth of 1.1% in 2014, it adds.
The company has also cut its annual economic output forecast for Ireland this year from 1% growth to just 0.1%.
However, Ernst and Young is pencilling in 1.9% growth in 2014 and growth of 2.5% in 2015.
The company said that while Ireland has made a lot of progress since the start of the financial crisis, the country's short term prospects are still ''weak''.
E&Y said it expects consumer spending here to fall by almost 2% this year, with marginal growth next year, due to a weak labour market and the tax increases and spending cuts announced in the Budget.
Unemployment levels in Ireland are set to remain stagnant this year at 14.9%, before a modest improvement of 13.8% is seen in 2015.
However, Ernst & Young welcomed the success of this week's 10 year bond auction, saying it was very good news for the economy.
''It is further evidence of investors' confidence in the sustainability of public finances and cements Ireland's restored access to financial markets,'' commented Marie Diron, senior economic adviser to the E&Y euro zone forecast.
''Similarly successful bond sales would encourage rating agencies to upgrade Ireland's credit rating. Achievements such as this is one of the main factors behind our forecast of a return to solid growth from 2014 onwards,'' she added.
On the euro zone, Ernst & Young says that confidence among businesses and consumers should return gradually, as some of last year's threats recede. But it added that business investment is still expected to contract by 2% this year, before recovering to post average growth of 3.5% a year form 2014 to 2017.
E&Y said it believes that markets have risen too strongly, ''given that many fundamentals remain weak at best and the ongoing political uncertainty in several countries''.