|The European Commission has warned that uncertainties in the global market could still threaten recovery [EPA]
The economy across the European Union is recovering faster than expected, but fears of another debt crisis remain, according to the bloc's executive arm.
The European Commission said the region should see a solid 1.8 per cent growth this year, as interim growth figures released on Monday showed growth around 0.75 percentage points higher than the EU's spring forecast.
But it cautioned that recovery "remain fragile" amid uncertainties in the global economic recovery.
"We have now solid ground under our feet," Olli Rehn, the economic commissioner said, with the rider: "There is no reason to shout for victory. Instead, we must remain alert and vigilant in the face of remaining uncertainties."
The EC said "global imbalances, high debt levels and lingering tensions in sovereign-debt markets" could still threaten economic recovery.
It said that the region had seen a partial recovery since it agreed a $975bn bailout to help stave off a financial meltdown, but that adverse economic conditions could not be ruled out.
The forecast said that while sovereign-bond spreads in most European countries have "narrowed somewhat" since the Greek debt crisis sowed widespread panic over other weak economies, "they are still significantly above the levels seen at the beginning of the year".
Rehn said he expects growth to moderate in the second half of the year, but he said a double-dip recession is unlikely.
He said that domestic demand, which had helped drive the growth figures was "encouraging".
"This rebalancing is encouraging in light of expected softening in global demand in the second half of the year and should also bode well for job creation in Europe," he said.