The euro zone's economic recovery is picking up pace faster than expected and growth is likely to exceed the 1.7 per cent forecast for this year, the European Union's head office said in Brussels.
"The recovery is now proceeding on increasingly firm ground," said Mr Joaquin Almunia, the EU's economics commissioner.
"After sending somewhat mixed signals in the first months of the year, confidence and leading indicators have now taken a more upbeat tone."
First-quarter growth in the euro zone growth came in 2.3 per cent up on the same period in 2003, above forecasts of 2.1 per cent. Private consumption in the first quarter rose 0.6 per cent from the last quarter of 2003.
However, Almunia urged caution for 2005, pointing to still-fragile private consumption and the risk of higher oil prices.
In the European Commission's quarterly economic report, Almunia said half of the 12 euro zone countries risked running up budget deficits over the next two years exceeding the bloc's target of 3 per cent of gross domestic product.