European Central Bank President Mario Draghi warned on Thursday that economic activity in the euro zone was expected to remain weak. The bank left interes rates unchanged at a record low of 0.75 percent as expected.
At a press conference following the decision, Draghi said the growth momentum in the euro zone was expected to remain weak.
"Economic activity in the euro area is expected to remain weak although it continues to be supported by our monetary policy stance and financial market confidence has visibly improved on the back of our decisions as regards Outright Monetary Transactions," Draghi said, referrring to the bank's bond buying program unveiled in September.
The European Commission on Wednesday sharply cut its forecasts for growth in the euro zone and recent data showed that the crisis in was now starting to affect Germany, which has so far remained resilient to the economic downturn.
"I think we're heading for a severe recession in the economic area of the 17 counties. We may see a contraction of up to 1.5 percent in 2013 and I would say becoming even more severe in 2014," Thorsten Polleit, chief economist at Degussa Goldhandel told CNBC.
He believes the ECB will have no choice but to cut rates before 2013 in a desperate effort to boost the struggling economy.
"I think in December they're going to cut interest rates by 50 basis points and so interest rates at the short end will be basically zero in nominal terms and negative in real terms," he said.
Draghi said there was clear evidence that consolidation efforts in euro area countries were bearing fruit, adding is was crucial that efforts were maintained to restore sound fiscal positions.
"Full compliance with the enforced EU fiscal and governance framework including the rapid implementation of the fiscal compact would send a strong signal to markets and strengthen confidence in the soundness of public finances," he said.
Spain remains one of the biggest concerns for ECB policymakers. Draghi declined to comment on whether he would like Spain to request aid through a new bond buying program, known as Outright Monetary Transactions (OMT).
He said it was up to Spain to decide whether it wanted to request aid, not the ECB.
Draghi unveiled the program in September to address what he said were "severe distortions" in sovereign bond markets. The high yields some heavily indebted countries face to finance their debt have exacerbated Europe's debt crisis.
But the program, created to ease Spain's troubles in particular, remains to be kicked into action.
It is only activated once a country applies, and it comes with strings attached.
The country in question must meet strict conditions set by the ECB, including enacting austerity and cutting budget deficits.
Those conditions mean that Spain has so far been reluctant to ask for help.
More From CNBC
German Exports Fall at Fastest Pace Since Dec 2011
Bank of England Opts Against Cash Boost as Economy Recovers
Euro Zone to Flatline in 2013, Pick Up in 2014: EU Executive