Europe Flirts with Deflation

Some analysts and public officials say the beleaguered euro zone is finally on the road to recovery. Unemployment has decreased slightly, though it remains high at 12 percent, and the euro zone as a whole grew by 0.3 percent in the last quarter of 2013. But theirs is an overly optimistic view. Recent data show that the economies of many European countries remain very weak, and the euro zone as a whole could soon experience deflation, a decline in the general level of prices, if government officials and central bankers do not take steps to bolster the economy. Last month, inflation in the 18 countries that use the euro was just 0.7 percent, down from 0.8 percent in December. That is far below the European Central Bank’s target for an inflation rate of just under 2 percent.