Growth in the 17 countries that use the common currency is expected to be “an anemic 1.1% in 2012,” the report said. In addition, “there is a 35 percent chance of the euro zone returning to recession if urgent action [on the sovereign debt crisis] is not taken.”

“These are difficult days for the Eurozone economy. All of those concerned--politicians, regulators and business leaders--have to work together to ensure we don’t fall back into recession,” Alain Kinsch, country managing partner of Ernst & Young Luxembourg, told the press. “Time is not on our side, we have to act quickly.”

The two firms said the euro zone has only regained about two-thirds of the GDP lost since 2008 “and it may take another five or six quarters before it returns to pre-crisis levels,” and only if European budgets and banking system are brought under control before an expected Greek government default.

Although the report pointed to strong export demand for European manufactured goods--mainly from emerging markets--unemployment is still expected to remain above ten percent “for some time.”