AFP - French auto company PSA Peugeot Citroen on Wednesday forecast that Europe's car market will shrink by a further nine percent this year as the company reported massive losses in 2009.

"In 2010 we expect the market conditions to be challenging, with a European market down nine percent," chief executive Philippe Varin said in a statement.

The company reported a net loss of 1.161 billion euros (1.599 billion dollars) in 2009, triple the loss of 363 million euros a year earlier.

But results were better in the second half of the year as sales in Europe picked up thanks to government incentives, with an operating profit of 137 million euros after an operating loss of 826 million euros in the first half.

2009 was "a highly contrasted year," the earnings statement said.

Car sales fell in Europe and the United States last year because of the global economic crisis but the full fallout for the industry has been averted by government trade-in schemes to encourage people to buy cars.