The Minister for Finance has rejected any suggestion that the Irish economy is on its way to a 'double dip' recession.

His comments came after figures, published today, showed that the economy shrank in the second quarter of this year.

The Central Statistics Office said economic output as measured by Gross Domestic Product, fell by 1.2% from April to June.

Minister Lenihan said the figures showed the economy was not growing enough, but added they also meant that the economy has moved from a very steep decline last year to a stabilised position.

GDP had grown by 2.2% in the first quarter, boosted by a strong increase in profits at multi-national companies based here.

Gross National Product, which excludes multi-national profits and is seen by many economists as a more accurate barometer of the Irish economy, fell by 0.3% compared with the first quarter.

On an annual basis, GDP was down 1.8%, while GNP was 4.1% lower.

Minister Lenihan said he accepted that the latest economic figures were not encouraging.

Speaking earlier on RTE's News at One, Mr Lenihan said the figures showed the economy has moved from a very steep decline last year to a stabilised position.

He said he accepted the interpretation that the economy was not growing enough and the position will pose serious challenges for the Government in December’s Budget.

Speaking at the National Ploughing Championships, Taoiseach Brian Cowen rejected any suggestion that Ireland was slipping back into recession.

The Fianna Fáil leader said 'the full year as opposed to quarterly accounts' would give a real picture of where Ireland is going.

Mr Cowen said work had to be done to increase domestic demand and get people spending.

He said the return of growth in the economy would only happen if exports are to be increased.

Figures are 'worst possible news'

However Fine Gael Finance Spokesman Michael Noonan said Ireland was heading for a 'double-dip' recession.

Mr Noonan said: 'If we needed any evidence that the Government's economic policy is a disaster, then we have it now.

'These figures are the worst possible news for hard-pressed families and businesses across Ireland.'

Mr Noonan's party colleague Leo Varadkar rejected the Minister's comments on the new figures and said they showed that the economy was shrinking. He said the figures were very worrying.

Labour Finance Spokesperson Joan Burton said today's figures were not surprising as all the signs are the economy is not turning the corner.

Speaking on RTÉ's Six-One News, Ms Burton said other economies are recovering and a more competent Government would have taken advantage of the international pick-up.

Separately, the country's cost of borrowing increased again this morning as investors remained concerned about Anglo Irish Bank.

The rate of interest demanded by investors for Government ten-year bonds rose to 6.58% this morning.

This compares to a rate of 2.3% for German bonds.

The spread between the two rose to a euro-lifetime-high of over 400 basis points.