An economist with the Economic and Social Research Institute has said the Government should not use the €1 billion saved by the promissory note deal to 'soften' the Budget for 2014.

John FitzGerald said the Government should go ahead with its plans to make €3 billion in cuts and savings.

He said it should then possibly 'ease off' on the proposed €2 billion in cuts for the following year.

He said the promissory note deal will end austerity 'slightly earlier' than it would have otherwise.

His comments came as a report by economists from ten European forecasting and research bodies said that euro area growth will be slow this year, but the euro zone could return to growth of more than 1% next year.

Mr FitzGerald also said that a lack of a co-ordinated fiscal policy in Europe - with Germany introducing cuts last year, and France and the Netherlands this year - was preventing the euro zone from returning to growth sooner.

He said that Ireland was 'still not out of the woods' and the country was still vulnerable to global financial downturns.