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Greek Deflation Eases from Record High

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Greek Deflation Eases from Record High

Consumer prices in Greece fell more moderately than forecast last month, adding further strain to the nation’s debt reduction efforts.

Consumer prices fell at an annual rate of 1.7 percent in December, following an annual decline of 2.9 percent the prior month. Deflation in November reached its highest level since the government began tracking monthly records in 1960. A median estimate of economists polled by Thomson Reuters forecasted a drop of 2.2 percent last month.

Record unemployment and excess capacity in the economy pulled consumer prices down for the tenth consecutive month, as Greece continues to battle a six-year recession. Greece’s unemployment rate rose to a new record of 27.8 percent in October, recent government data showed. By comparison, the average unemployment in the euro area is 12.1 percent.

“The slowdown in pace in December was due to special discounts offered in the previous month,” said Nikos Magginas at Greece’s National Bank. “The new reading is more in line with the overall trend which is expected to continue for the next couple of quarters.”

Deflationary pressures are among the most pressing concerns facing the euro area. Consumer inflation unexpectedly fell to 0.8 percent in December, according to preliminary estimates from the European Commission. The European Central Bank claims it will do everything in its power to avoid deflation. Looser monetary policy, however, will draw the ire of Germany’s Bundesbank, which has repeatedly warned against such policy.

The 18-nation currency bloc is expected to expand by as much as 1 percent this year, according to estimates. According to the Greek government, Greece’s economy will expand 0.6 percent in 2014, ending six consecutive years of contraction.

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