The German chancellor, Angela Merkel, has warned that the year ahead will "undoubtedly" be harder than 2011 in the starkest of a series of downbeat messages from European leaders dominated by fears over the economy. 

Merkel said Europe was experiencing its "harshest test in decades" but would ultimately be made stronger by the crisis. 

Urging greater European co-operation to salvage the Euro, Merkel said the German economy was performing well "even if the next year will undoubtedly be more difficult than this one". 

Her solemn new year greeting, broadcast on Saturday, set the tone for those of her European counterparts. 

The Greek prime minister, Lucas Papademos, spelled out a continuation of harsh austerity measures, while the Italian president, Giorgio Napolitano, warned that sacrifices would have to be made if the country was to avoid "financial collapse". 

The French president, Nicolas Sarkozy, said people had to be "courageous" when facing the challenges ahead. " I know that the lives of many of you, already tested by two difficult years, have been put to the test once more.  You are ending the year more worried about yourselves and your children," he said, adding: "This unprecedented crisis, which is without doubt the worst since the second world war, is not over". 

But Sarkozy, who is lagging behind in the polls just months from a presidential election, vowed that there were nonetheless "reasons to be hopeful" and that no further public spending cuts would be made. 

Napolitano was less eager to gloss over the economic position of a country which last year was feared to be on the brink of becoming the next eurozone country to seek a bailout. " Sacrifices are necessary to ensure the future of young people; it's our objective and a commitment we cannot avoid," he said in his new year speech. 

"No one, no social group, can today avoid the commitment to contribute to the clean up of public finances in order to prevent the financial collapse of Italy," Napolitano added. 

As growth stalls in countries across Europe, governments are coming under pressure to make further cuts to spending and fears are growing that 2012 could bring a second recession. 

In Greece – the first country to have sought a bailout in 2010 – Papademos warned there would be no let-up in the austerity measures, which many Greeks feel are too tough. " We have to continue our efforts with determination, so that the sacrifices we have made up to now won't be in vain," he said in a televised address. 

Papademos, an economist who was appointed to lead an interim coalition government in November after the resignation of George Papandreou, insists the measures are essential if Greece is to continue to receive bailout funds.