Ireland's budget deficit should fall to 8.3% of GDP in 2012, below the Government's original forecast of 8.6%.

The forecast is, however, in line with the stability programme update according to the European Commission's Spring Economic Forecast.

The underlying deficit in 2011 was 9.4%, not including one-off bank support measures of 3.7%.

Today's report found that the economy returned to growth in 2011 after three years of contraction, with growth of 0.7% recorded.

The underlying deficit in 2011 was 9.4%, not including one-off bank support measures of 3.7%.

However, domestic demand fell for the fourth successive year in 2011. Private consumption dropped by 2.7%, Government consumption fell by 3.7% and investment by 10.7%.

The European Commission expects Ireland's economy to grow 0.5% in 2012 and by 1.9% in 2013.

The Commission, in its Spring Economic Forecast, said that the euro zone economy will shrink by 0.3% in 2012, but recover in the second half of the year and grow by 1% in 2013.

Unemployment across the euro zone is expected to remain at a high of 11% in 2012 and 2013, the Commission said.

The EU says that it expects the French economy to grow less than the 1.3% expected by new French President Francois Hollande.

Spain will miss its 2012 and 2013 public deficit targets and the country will remain in recession through 2013, according to the EU.

The deficit will reach 6.4% this year, way off the Spanish government's 5.3% target, and 6.3% in 2013, while the economy will shrink by 1.8% this year and 0.3% in 2013.