The five-year curse afflicting Europe

Not all deflation is bad. However, the kind spreading across Europe is deadly and will take years to address.

Deflation emerged as a distinct threat to Europe’s tentative economic recovery earlier this year and since then conditions have deteriorated further. Europe stands on the precipice of a triple-dip recession and at this point it appears unlikely that rates will rise in the euro zone for at least another five years.

But why is deflation such a threat? And should households and businesses really be worried?

It’s a fair question, and one that deserves to be fleshed out further. Surely declining prices are a good thing, right?



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