Brussels, 14 Sept. (AKI) - Italy's gross domestic product will shrink by 5 percent this year but after a "deep" recession is seeing a "a gradual improvement," the European Commission said on Monday. The Italian economy will experience "a weak recovery" in the second half of the year, the commission said.

The commission's latest forecast for Italy's economic growth in 2009 is worse than the -4.4 percent it predicted earlier this year. It compares with -4.0 percent GDP growth the commission predicts for the European economy as a whole.

The EU economy is climbing out of recession, said European Union economic and monetary affairs commissioner Joaquin Almunia.

"The situation has improved – mainly due to the unprecedented amounts of money pumped into the economy by central banks and public authorities – but the weak economy will continue to take its toll on jobs and public finances.

"We need to continue implementing the recovery measures announced for this year and 2010, and accelerate the repair of the financial sector to make sure banks are ready to lend at reasonable terms when companies and households resume their investment plans," Almunia stated.

The assessment will raise awkward questions for political leaders faced with agreeing the phased withdrawal of state funding.

The commission forecast growth of 0.2 percent for the third quarter of this year (July to to September) with Germany and France continuing to grow and Italy exiting recession.

Germany will grow 0.7 percent, Italy and the UK by 0.2 percent, while Spain and the Netherlands' economies will shrink by 0.4 percent in the third quarter of the year, the commission said.

The eurozone's two biggest economies, Germany and France, have already emerged from recession.