The EU says the rejection of the Croke Park 2 deal poses a threat to Ireland's economic recovery this year.

In its spring economic forecast the EU says the planned wage bill savings of 300 million euro this year need to be materialised.

The EU also warns that the cost of liquidating IBRC could be higher than anticipated.

Overall it finds an encouraging economic performance by Ireland which has now completed two thirds of its adjustment programme.

The economic forecast also warns that recession in the eurozone will continue for the rest of this year, with unemployment remaining at record levels - but signs of recovery may emerge in 2014.

Economic output in the 17-nation euro area will shrink by 0.4 percent this year - that figure is worse than the 0.3 percent forecast in February and comes after a 0.6 percent contraction last year.

Record levels of unemployment are set to continue, with strong divergence between richer eurozone states to the north and members to the south - rates will vary hugely, with 27 percent in Spain and a low of 4.7 percent forecast for Austria.

The report says unemployment in Ireland is set to be lower than in earlier projections, but this is mainly on account of stronger-than-expected emigration flows.

For the full details of the EU Commission's economic forecast click here: