Brussels, 28/01/2014 (Agence Europe) - The reduction in price rises in the eurozone is a result of the price adjustments in the southern euro nations, say the eurozone finance ministers, but, if the low inflation continues too long, then there would be a growing risk of deflation.
The chair of the Eurogroup, Jeroen Dijsselbloem, says that, at present, low inflation was expected because it is a result of the normal process of internal devaluation within the eurozone through lower labour costs in countries in receipt of financial aid, but this would become the risk of deflation if it lasted for a very long time in Greece, for example. He was speaking on Monday 27 January after a meeting of eurozone finance ministers. Euro Commissioner Olli Rehn said the risk of eurozone deflation was “remote” and that the ECB says it is prepared to intervene, as allowed under the treaty (see EUROPE 11005). Rehn expressed concern, however, over the possibility that the low inflation might last for a long time.
Eurogroup took note of encouraging prospects for the euro economy in 2014. Dijsselbloem said this was a sign that the social and economic strategy that had been developed was working well and should continue. He urged the EU18 to carry out structural reforms to boost competitiveness, such as new labour market reforms in Spain and France. Rehn said there were growing signals that unemployment had reached a peak and had started to decline in a number of countries. The turbulence seen in emerging economies were a sign of the continuation of risk and showed there was no room for complacency, he added. (MB/transl.fl)