Europe struggles to avoid deflation’s grip

Europe struggles to avoid deflation’s grip

Press quote (The New York Times)
Simon Tilford
03 June 2014

“Inflation is so low,” said Simon Tilford, deputy director of the Centre for European Reform in London, “because wages have fallen sharply and consumer demand and investment have been depressed.” In addition, banks have curbed lending, stifling thousands of small and midsize businesses, which create the majority of jobs across the eurozone.

“So economies are not growing as much as they could,” Mr Tilford said. “Human and physical resources are not being employed and prices are pushed down further.”

He is among economists who say the ECB should be trying to push inflation much higher than its 2 per cent target to lift prices and incomes. Doing so, they argue, would create a virtuous growth-and-investment cycle that would also help countries reduce their debt burdens.