Eurozone consumer prices fall for first time since 2009

Eurozone consumer prices fall for first time since 2009, adding to deflation fears

Press quote (New York Times)
Simon Tilford
07 January 2015
From 
http://www.nytimes.com/2015/01/08/business/international/europe-economy-deflation.html?_r=0
“The eurozone is suffering from a profound malaise,” said Simon Tilford, deputy director of the Centre for European Reform in London. “It’s already in a deflationary trap of the kind we saw in Japan in the 1990s, but it’s less well equipped than the Japanese to deal with it,” he added, citing the institutional challenges of managing a 19-country currency bloc.

...Officials still appear to be “in denial” about the gravity of the problem, Mr. Tilford said. “Unfortunately, the longer they postpone meaningful action, the larger the policy response will need to be.”

...“Normally, when inflation expectations are as catastrophically low as they are right now in the eurozone, macroeconomic policy would be set aggressively to counteract that,” Mr. Tilford of the Centre for European Reform said. “They need a two-pronged policy: full-blown quantitative easing by the central bank, and an expansionary fiscal policy by governments to boost demand.”

Mr. Tilford said that he expected the European Central Bank to move forward with quantitative easing, but that it would be hard to convince the market that the central bank “will do enough for long enough to restore inflation expectations.”

As for government pump-priming, which if it happened could come from tax cuts or deficit spending, Mr. Tilford said, “There is absolutely no indication at all that we’ll see a change in fiscal policy.”