Growth should lift the euro currency against the dollar and inflation should remain low, although the European Central Bank may need to raise interest rates "over the next years" to keep the expansion going, it said.

But the upbeat picture was tempered with warnings about continued downside risks facing the global economy, most notably from a US stock market which the European Union executive said appeared "seriously overvalued" by most measures. The Commission on Wednesday forecast the eurozone economy would grow by a higher-than-previously-expected 2.9 percent in 2000 and 2001 after expanding by 2.1 per cent in 1999.