A new forecast of the euro area economy predicts further modest growth in the economy for the next two years.
But it warns that Europe's sovereign debt crisis must be resolved quickly, and that failure to prevent instability spreading from Ireland to other states could undermine growth across the continent.
This analysis by Euroframe - a consortium of ten independent research organisations including Ireland's ESRI - forecasts growth for the euro zone as a whole will be 1.6% next year and 1.7% in 2012.
It says the recent gradual easing of growth will continue into next year, before picking up again the year after.
Austerity budgets across the euro zone, as well as the withdrawal of stimulus programmes and weak consumer spending are the reasons for this relatively modest upturn.
It says unemployment in the 16-nation bloc will be 9.7% in 2012, and it commends German wage moderation for helping to reduce the unemployment rate there.
The weak economic outlook leads them to conclude that the ECB will raise interest rates very slowly, forecasting a rate of 1.6% by the end of 2012.
But it warns all the projections assume a swift end to the sovereign debt crisis, and stopping contagion from Ireland spreading to other states.
