Ireland

will record the highest growth in the

European Union

this year, the

European Commission

said yesterday, projecting a growth rate of 4.6 per cent for 2014.

In its autumn economic forecast, the commission upgraded its growth estimates for Ireland next year, forecasting that gross domestic product will grow by 3.6 per cent in 2015, compared to the 3 per cent predicted six months ago.

Announcing the forecasts for the EU's 28 member states yesterday, commission vice-president Jyrki Katainen singled out Ireland's performance. "Even though the medicine was very bad-tasting, very hard for ordinary citizens . . . now Ireland is coming back," the former Finnish prime minister said. "Ireland, by doing what was necessary to do, has regained confidence back, which means that private investors can trust in the country's future . . . which means more jobs for the ordinary citizens."

Struggling euro zone

Ireland’s strong economic performance was one of the few bright spots in yesterday’s economic forecasts, with the commission slashing forecasts for euro zone growth, as the European economy struggles with high unemployment, low inflation and slow growth.

The euro zone economy is expected to grow by 1.2 per cent next year, compared to the 1.7 per cent forecast in May. In a sign of the challenges facing the European economy, the euro zone's largest economies – Germany, France and Italy – are expected to register a slowdown in economic growth, with the commission projecting growth of 1.1 per cent for Germany in 2015, compared to 2 per cent forecast six months ago.

France, which has been battling with Brussels over its 2015 budget, will see its deficit widening to 4.4 per cent of GDP this year, compared with a forecast of 3.9 per cent in May.

Similarly, Italy, the euro zone’s third-largest country, will see its economy contract by 0.4 per cent this year, and grow by 0.6 per cent in 2015, compared to May’s estimate of 1.2 per cent.

Asked if Germany could still be seen as the "engine" of Europe, Mr Katainen said that growth in Germany was still higher than in many other member states, highlighting the country's strong industrial base.

“Germany can play a significant role in stimulating the euro area and EU economy, but we have to accept the truth also that we need more engines. Europe will not survive if there is only one or two or three engines,” he said.

Speaking in Berlin yesterday, German chancellor Angela Merkel acknowledged the need for greater EU investment to stimulate European economies, but warned that doing so using debt would be a retrograde step. She told Germany's employers association yesterday that the euro area's economic situation was "extremely fragile" thanks to countries calling into question the structural reforms they had vowed, but as yet failed, to implement.

Flexibility accord

“We had barely tightened up the stability and growth pact when the discussion began over whether it is really necessary or whether one should look again at the flexibility we had agreed,” she said.

Such demands to renegotiate European agreements contributed great uncertainty on financial markets, she added, about how serious EU leaders were about learning from the euro crisis.

The stability and growth pact, she reminded her audience, was an agreement to marry budgetary consolidation with economic growth.

“Thus I think it’s unacceptable when so-called austerity is forever set up against growth,” she said.

“This only confuses things and won’t lead to any progress in Europe.”

Jean Claude Juncker, who began his five-year term as president of the European Commission, is due to unveil details of a €300 billion investment plan for Europe by the end of the year.