The EU is facing an unprecedented situation due to the economic crisis and it needs to work at different levels to restore credit flows, according to European Commission President Jose Manuel Barroso.

Mr Barroso said the bloc's economy was expected to contract by two per cent this year, roughly in line with earlier commission estimates and much rosier than a forecast from European Central Bank staff on Thursday, who said the eurozone could shrink by as much as three.

Mr Barroso said recovery was the executive Commission's main focus, so it was accelerating spending this year and next to boost the economy.

"As much as 3.3 per cent of our GDP is now being pumped into the economic system," he told a conference about EU regions and cities in the Czech capital.

"This is an equivalent of more than €400 billion, and amounts to potentially massive support for growth and employment across the EU."

He said the bloc should work at different levels to get credit flows moving again and stimulate demand, with a particular focus on small- and medium- sized businesses.

"The crisis will take time to fix. It's a serious crisis, but we can fix it," he said.

On Thursday the ECB cut interest rates to an all-time low and signalled further monetary easing was possible. It also said it was studying non-standard measures to help boost liquidity.

Mr Barroso said he would soon come with proposals on hedge funds and executive pay as a way to restore confidence in markets.

The Commission proposed new measures on Wednesday to make financial markets and institutions safer for investors.