- Jennifer McKeown, Capital Economics
Inflation in Germany fell to the lowest level in more than five years, increasing pressure on the European Central Bank to deploy fresh stimulus measures to avert deflation in the currency bloc. Consumer prices (HICP) in Europe's biggest economy declined to 0.1% in the last month of the year, down from 0.5% in November and against markets consensus of 0.2%. On a monthly basis, inflation came in at 0.1% in December. Slowing inflation in Germany provides the ECB Governor Mario Draghi with additional reason to start mass purchases of Euro zone government bonds, known as quantitative easing. The big concern now, however, is not the timing of additional measures, but the way the ECB might structure its QE programme in light of elections in Greece on January 25, three days after the next ECB board members gathering. Thus, the question of present interest is—will the ECB include Greek bonds? Nevertheless, the German government believes that whichever party wins the elections, Greece will continue to stay on the course of the terms of international bailout.
Meanwhile, the number of unemployed in Spain fell again in December, the Ministry of Employment and Social Security said. The number of registered workers without a job dropped by 64,400 in the reported month, following the 14,688 drop of registered jobless workers in November.
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