GDP fell 0.2% in the final quarter of last year to put Ireland officially into recession, alongside Belgium, the Netherlands, Italy, Portugal and Greece

Ireland ended last year in recession, according to figures released on Thursday, dealing a blow to the policy of economic austerity being forced on struggling eurozone countries by the European commission and the IMF.

A dip of 0.2% in GDP in the last quarter of 2011 followed a steep fall in the third quarter, after an export drive was undermined by the slowdown in global demand. A recession is defined as two consecutive quarters of economic contraction.

Ireland, which had become a poster child for austerity when its economy pulled out of its nosedive earlier last year, joins fellow eurozone countries Belgium, the Netherlands, Italy, Portugal and Greece in recession.

The Irish finance minister, Michael Noonan, promised a swift recovery last year after record export figures appeared to show foreign trade would galvanise the economy, which had to be bailed out with €90bn by the European commission, IMF and European Central Bank in December 2010. However, the euro crisis and a slowdown in some key export markets dampened demand for Irish goods.

Dublin has focused on exports after it was forced to impose a dramatic squeeze on public spending by Brussels as the price of a multibillion-euro rescue package. The housing crisis that resulted from the largest property boom in the eurozone has also restricted domestic demand.

Such is the poor state of the Dublin government's finances that Irish central bank governor, Patrick Honohan, is expected to ask the ECB for permission to delay a cash payment on its banking debt.

The state is due to make a €3.1bn (£2.6bn) payment to the former Anglo Irish Bank, which is then supposed to use the funds to reduce its emergency borrowings from the country's central bank.

Instead, Anglo Irish, which is a "zombie" bank closed to new business, may use the funds to buy a new Irish government bond, recycling the cash back to the state. The bond can then be used to tap funding from the ECB. Described as an accounting trick by some economists, it allows Dublin to use ECB money to prop up the bank rather than its own.

Dublin faces some of the biggest debts from its banking crisis of any eurozone country after a splurge of lending in the boom years. The decision to nationalise all the major bank groups has landed the government with all their debts, which need to be serviced to avoid a default.

Noonan is expected to focus on the growth in GDP over the whole year and the recovery in the fourth quarter from the 1.1% contraction in the third quarter, which was revised up from a previously disastrous 1.9% fall in output.

Over the 12 months to December GDP rose by 0.7%, ending three successive years of declines that saw the economy shrink by a cumulative 10.4%.

Analysts had expected GDP to rise by 0.4% in the final months of last year and 0.9% for the year as a whole, just shy of the 1% the government had pencilled into its fiscal plans.

Gross national product, seen by some economists as a more accurate indicator of the state of the economy because it strips out the earnings of Irish-based multinationals, fell 2.2% in October-December, compared with a 1.5% increase expected by economists.

Ireland's current account surplus came in at €796m in the fourth quarter.

The Irish experience was reflected in figures showing that new orders for the eurozone's factory goods fell in January, as businesses struggled to put the worst of the debt crisis behind them and the cooling Chinese economy underscored the fragility of the bloc's recovery.

Manufacturing orders in the 17 countries that share the euro fell 2.3% from December, the European Union's statistics office, Eurostat, said on Thursday.

The eurozone's sick economy was evident in the weak annual Eurostat data, as industrial orders fell 3.3% in January versus the same period a year ago, slightly worse than an expected fall of 3.0 percent.

EU policymakers are betting that demand from the healthier economies of the US and China will pull the eurozone out of its second recession in three years at a time of job cuts and budget austerity at home that is doing little for growth.

But surveys showing a second successive fall in manufacturing and services activity in March in the euro zone, released separately on Thursday, suggested that foreign demand is muted and may not be enough to help Europe.

Rising oil prices could also become a stumbling block for growth as they force businesses to pay more for energy and limit their ability to compete and hire more staff.

"The economy stabilised at the start of the year but that doesn't mean there is going to be a strong recovery," said Carsten Brzeski, ING's senior economist for the euro zone. "The surveys show you can't count your chickens before they hatch."

China cut its growth target to 7.5% in 2012 from the 8% goal in each of the previous eight years, citing the European debt crisis and a shrinking market for its goods.