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Western EuropeJanuary 5 2015

Pier Carlo Padoan

With the eurozone flirting with deflation, solutions to this problem are urgently needed. One of them – the integration of markets and institutions – offers hope, according to Italy's minister of economy and finance, Pier Carlo Padoan.
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Pier Carlo Padoan

A fear of a decline in prices has been taking shape over the past two years. The first mentions of deflation have been appearing in private conversations and public debate among economists in this time. However, caution and scepticism has prevailed.

Since then, the Italian ministry of economy and finance has recorded data that shows a continuous decrease in the level of prices in Italy. Is it necessary to intervene? Do we already have deflation? The problem with these questions is that by the time we wake up and realise there is deflation, it will already be too late. Exiting from deflation is very difficult, because if consumers start to expect lower and lower prices, they will develop a propensity to postpone spending and their expectations will be confirmed.

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