The European economy was in the "midst of its deepest and most widespread recession" in the post-war era, warned EU Financial and Monetary Affairs Commissioner Joaquin Almunia.
The economy was expected to contract by four per cent in the worst post-war slump and to broadly stabilise in 2010, Mr Almunia told a packed press room in Brussels after the publication of the latest EU economic forecast.
Though the situation was being prolonged, the former Spanish Finance Minister cautiously highlighted recent improvements suggesting the slump may be stabilising.
"We are no longer in a freefall but even if some positive signals are appearing we do not have the critical mass of data to say that we are out of the woods," he said.
The ambitious measures taken by governments and central banks in these exceptional circumstances were expected "to put a floor under the fall" and enable a recovery next year.
"For this to happen we need to proceed rapidly with the cleaning up of the 'impaired assets' on bank balance sheets and recapitalise banks when appropriate," he said.
The EU's economic forecasts, published twice a year, show that the EU's economy will continue to underperform, at least until the end of this year.
The main factors behind the recession are seen as the worsening of the global financial crisis, a sharp contraction in world trade and ongoing housing market corrections in some economies.
Labour markets will be severely affected, according to the forecast, with the unemployment rate expected to hit 11 per cent in the EU in 2010.
The public deficit is also forecast to rise sharply, to 7.25 per cent of GDP in 2010, reflecting both the slowdown and the discretionary measures taken to support the economy.
According to the Commission, the economic downturn has swept a growing number of countries along in its wake, including emerging and developing countries.
However, as fiscal and monetary stimulus measures gain traction and the financial crisis gradually peters out, global GDP growth is expected to turn positive in the second half of 2009. In 2010, global growth should reach two per cent.
Still, mass employment could return to haunt Europe with some 8.5 million expected to lose their job this year and the next.