Stocks on both sides of the Atlantic have remained relatively sanguine in March as the so-called Troika (the European Commission, the European Central Bank and the International Monetary Fund) agreed to give Cyprus a 10 billion euro ($13 billion) bailout. The country also imposed credit controls and a levy on large deposits.

But the story is far from over, according to Citi, with the euro area's economic prospects remaining far from healthy.

(Read More: Cyprus Bailout in Danger as Opposition Grows)

"We continue to assume that Greece and Cyprus will leave EMU (European Monetary Union) over time," Citi said in the note published late Wednesday.

"We expect the euro area to stay in recession for this year and 2014 - with deep recessions in most periphery countries - and with further episodic flare ups of financial market tensions."