Irish Taoiseach Brian Cowen has insisted that people must start spending more cash as he dismissed claims that Ireland is heading for a double-dip recession.
Official figures revealed the Republic's economy began to contract again between April and June after showing the first signs of recovery in the previous three months.
National output dropped a significant 1.2% but Mr Cowen rejected claims that the country was slipping back into a second prolonged downturn.
"I don't accept that analysis, based on this second quarterly report," he said. "You have to look at the full year to get the best possible estimate of how things will go."
Mr Cowen said the Central Statistic Office (CSO) report came against a backdrop of the economy performing better than expected in the first three months of the year.
Despite unemployment soaring to 462,000, the Taoiseach singled out the big decline in consumer spending and claimed that people will have to get out and shop to help resurrect the country's fortunes. "We have to continue to encourage people - those who have disposable income - to spend in the domestic economy," he said.
The CSO report showed Gross Domestic Product (GDP) - the value of goods and services including foreign-owned companies - suffered a 1.2% decline in trade between April and June.
The downturn came after businesses, both home-grown and multinational, had shown signs of picking up after the New Year.
Domestic firms were also hit in the second quarter, but not to the same extent, with their value down by 0.3%.
In a breakdown of the national accounts, the CSO said the economy was hit by a fall in consumer spending - down 1.7% compared with the same period last year.