A European Commission report says Ireland has made "important progress" on the public finances, the banks and economic reform measures.

In a report following its latest review of the EU/IMF bail-out programme, the Commission said there would be a gradual return to positive economic growth this year, while the budget deficit was expected to be well below the 10.5% of GDP target.

The report added that the recapitalisation of the banks had been completed at a significantly lower cost to the State than originally anticipated.

The Commission welcomed the Government's plan to publish a three-year plan outlining the measures it planned to take to reduce the deficit to 3% of GDP by 2015. It said "early specification" of the plans would help sustain recent improvements in market sentiment towards Ireland.

The Commission left its GDP growth forecasts unchanged at 0.6% this year and 1.9% in 2012. But it now expects a bigger fall of 2.4% in private spending this year. The previous forecast was for a 1.9% drop.

The Commission lowered its unemployment rate forecast for this year slightly - from 14.5% to 14.3% - but warned that the rising figures for long-term unemployment needed "considerable attention".

It said the main risks to Ireland's performance were uncertainty about the broader euro zone debt crisis and the effects of a weaker global economy on exports.

Taoiseach Enda Kenny has said today's report from the European Commission indicates that there is now an international recognition that decisions by Government and the EU are having a beneficial effect on Ireland.

Mr Kenny said international analysts and economists were now regarding Ireland as a country that can emerge from the emergency loan by Government and people working together.