Eurozone set to slide into deflation

Thursday, 28 May 2009, 12:08 Hrs
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Brussels: Belgium Thursday joined Germany, Portugal, Ireland and Spain in posting a drop in consumer prices, highlighting concerns that the 16-member eurozone may soon slide into deflation as a result of the global recession.

Belgian consumer prices fell in May from April, by 0.37 percent, for the first time since December 1960. The drop was largely the result of a 17.7 percent fall in electricity, gas, heating fuel and petrol prices, Belgian media reported.

Germany's European harmonised index fell by 0.1 percent, the country's statistical office said Wednesday. Deflation has already hit Spain, Ireland and Portugal, three of the European countries most affected by the economic slowdown.

Economists now expect average consumer prices in the 16-member eurozone as a whole to fall in June, adding to the difficulties that the European Central Bank is experiencing as it tries to deal with Europe's worst recession in decades.

Deflation is generally defined as a decline in prices as a result of a severe contraction of economic activity.
Source: IANS
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