Europe's economy will grow by a substantially faster than expected 1.7% across the euro zone this year, according to new European Union forecasts released today. 'Based on an update for the seven largest EU member states focusing on growth and inflation this year, real GDP is now projected at 1.8% in the EU and 1.7% in the euro area in 2010', the European Commission said. The previous forecast was for 0.9% growth in the euro zone in 2010, and 1% for the 27 EU members as a whole. Brussels said it was encouraged to see signs of a 'revival in domestic demand, including private consumption particularly in Germany' alongside an export-driven industrial rebound. But it also warned that 'amid continued high uncertainty, risks to the EU growth outlook remain elevated.' Meanwhile, the EU's economics affairs commissioner, Olli Rehn, has urged Ireland to act ruthlessly with a 'rigorous approach' to tightening public finances, amid continuing concerns over the banking sector. 'The Irish government has convincing plans to complete the financial repair in Ireland, which, as we well know, unfortunately is going to be quite costly,' Mr Rehn said. Dublin is currently reflecting on steps it needs to take towards fiscal consolidation, he said, stressing that it is 'very important that Ireland maintains its rigorous approach as regards public finances, despite these formidable challenges'. Europe's economy outpaced the US and Japan between April and June, pulled up by Germany's best quarterly performance since reunification in 1990, with growth of 2.2%. The euro zone grew by 1% compared to quarter-on-quarter growth of 0.4% in the US and 0.1% in Japan, according to official data. But the figures masked deepening divergences even among the biggest countries and leading the EU to warn of 'multi-speed' recovery in today's predictions. The European Commission also warned a resurgent euro zone debt crisis, with the EU warning of 'lingering tensions' in Ireland and elsewhere. 'The global recovery is still expected to be uneven and is surrounded by major uncertainties,' the European Commission said in its autumn forecast, citing 'the resurfacing of global imbalances, high debt levels and lingering tensions in sovereign-debt markets.'