-Siim Kallas, European Commission Vice President
According to the European Commission, low inflation will continue to pose a threat to the Eurozone's expansion for at least the next two years. The institution trimmed its forecasts for the Euro area's inflation, increasing the number of government bodies, whose data raise the spectre of deflation in the region that is struggling to emerge from four years of economic crisis. Also, it lowered its economic-growth outlook and warned of the effect of tensions with Russia.
The Brussel-based commission estimates that inflation will hover around 0.8% this year and 1.2% in 2015, both lower than the February estimates and well below the ECB's goal of 2%. The Eurozone's GDP is expected to rise 1.7% next year, compared with the EC's previous forecast of 1.8%. Less than a year after the Euro loc emerged from the longest-ever recession, the region is still vulnerable as fragile public finances, emerging markets volatility and a strong Euro undermine the recovery. However, Angel Merkel believes that politicians should refrain from trying to influence the Euro rate, saying that the level of the single currency is an issue for the ECB only. The central banks, which is currently weighing unprecedented measures to avert deflation threat, including negative interest rates or launching U.S.-style quantitative easing, could make a decision as early as this week when its Governing Council meets in Brussels.
© Dukascopy Bank SA