Eurozone 'facing lost decade of stagnation' as inflation falls and unemployment remains high

By DAILY MAIL CITY & FINANCE

Updated: 04:22 EST, 1 February 2014

Fears that Europe is heading for a Japanese-style lost decade intensified yesterday after inflation unexpectedly fell and unemployment remained stubbornly high.

Figures from official statistics agency Eurostat showed inflation in the eurozone fell from 0.8 per cent in December to 0.7 per cent in January – stoking concerns that a damaging bout of deflation is on the way.

A separate report showed unemployment in the single currency bloc held firm at 12 per cent last month, with more than a quarter of the workforce in Greece and Spain unable to find a job.

Eurozone crisis: More than a quarter of the workforce in Greece and Spain is unable to find a job

There were more than 19million out of work – down 129,000 on November. The figures will pile pressure on the European Central Bank to take action to stop the region replicating the years of deflation and stagnation suffered by Japan.

Azad Zangana, European economist at Schroders, said: ‘The low levels of inflation are leading many investors to question whether the eurozone is slowly slipping into a Japanese-style deflationary downward spiral.’