The European Commission has forecast that the euro zone's economy will grow by 1.6% this year, but the recovery will remain uneven.
The Commission, which late last year forecast 2011 growth of 1.5%, said the improved outlook was supported by 'better prospects for the global economy and upbeat EU business sentiment'.
'While exports should continue supporting the recovery, a rebalancing of growth towards domestic demand is expected for 2011, resulting in more sustainable growth,' said EU economic affairs commissioner Olli Rehn.
But he added that the recovery remained uneven, and many member states were going through 'a difficult phase of adjustment'.
Euro zone inflation climbs again
Meanwhile, a first estimate shows that the annual rate of inflation in the euro zone rose to 2.4% in February from 2.3% in January. The rate is the highest since October 2008.
It was also above the European Central Bank's hopes for medium-term inflation slightly below 2% across the 17-nation euro zone.
The February rate marks the third successive month in which inflation crept above the 2% mark as economists speculate that the ECB will have to raise interest rates sooner or later to tame rising price.
ECB president Jean-Claude Trichet warned in mid-January that if inflation continued to rise, the bank would not hesitate to bump up its base rate, which is has been at a record low 1% since since May 2009.
Separate figures showed that the euro zone unemployment rate fell slightly in January to 9.9%, from 10% in December. Almost 15.8 million people in the euro zone were unemployed, Eurostat estimated. Spain had the highest rate of 20.4%.
Economist forecasts ECB rate rises from Q3
Ulster Bank economist Simon Barry has forecast that the European Central Bank will begin to increase euro zone interest rates in the third quarter of this year.
In a report published today, he said he expected a series of quarter-point hikes to take rates from the current 1% to 2.5% by the end of 2012.
Mr Barry said the ECB was facing a combination of inflation pressures and higher than expected economic activity. He said that while there had been no sign of key phrases such as 'strong vigilance', the ECB's rhetoric had become more hawkish on inflation recently.
The economist also said he expected the Bank of England to become the first major central bank to increase rates, with a quarter-point rise in May, as UK inflation had recently been higher than expected.
