The European Commission has released its latest economic predictions in Brussels.
According to its calculations, the EU economy will shrink by 4% over the next year, with unemployment reaching 11.5% by next year.
Economic and Monetary Affairs Commissioner Joaquin Almunia said 'We are no longer in a freefall, but even if some positive signals are appearing we do not have the critical mass of data to say that we are out of the woods.'
The Commission said the Irish economy will shrink by 9% this year.
In his Budget speech last month, Finance Minister Brian Lenihan said the contraction would be 7.7%.
However, Minister for Finance Brian Lenihan, has said there are signs of hope despite the Commission’s forecast.
Speaking in Brussels, where he attended a meeting of finance ministers from the Eurozone, Mr Lenihan said forecasting was not an exact science and the performance of Ireland's export sector was encouraging.
The Commission says there will be modest recovery in the second-half of 2010, but that unemployment in the EU would rise sharply with the disappearance of 8.5m jobs.
At a news conference in Brussels, Mr Almunia, said Ireland's recent supplimentary Budget was a step in the right direction.
