Recent hard data and survey indicators suggest the euro area recovery rests on firm grounds, according to the EU finance committee' quarterly report.
Economic growth in the third quarter came in stronger than expected, business confidence is back at the level of mid 2001 and consumer confidence shows some improvements.
The euro area recovery has so far been mainly export driven.
Despite the euro appreciation, the report says, external demand will continue to be buoyed by a simultaneous upturn in all major parts of the world.
Domestic conditions across EU15 are turning more supportive and should allow domestic demand to gather momentum. A further pick-up of growth in the first quarter of 2004 is also likely.
The report looks at business cycle linkages between the euro area and the US economies.
In the past years, cyclical fluctuations in both regions have been more closely linked than before. This is partly the result of increased trade and financial linkages but also reflects the fact that the two economies have been hit by common shocks.
The sharp pick-up in the US economy is a positive signal for the euro area, but its impact should not be overestimated. The recovery in the euro area also depends on the speed with which previous shocks are absorbed.
In contrast to the United States, the euro area as a whole has experienced a continuing decline in labour productivity in the second half of the nineties although several euro area member states have outperformed the United States in terms of hourly labour productivity.