Eurozone on the brink of deflation, says Bank of Italy

(AGI) Rome, Nov 19 - The eurozone is on the brink of deflation,said Salvatore Rossi, the Director General of the Central Bankof Italy on Wednesday. "The slowdown in prices pushes up realinterest rates, discouraging corporate investments and drivingdown loans; furthermore, it makes debt servicing more costly,"he said. "An inflation rate close to deflation now has aparticularly serious fallout in the eurozone, hinderingdeleveraging in countries with a high public or private debt,slowing down the readjustment of relative prices in thedifferent eurozone countries and also the recovery ofcompetitiveness and the elimination of

(AGI) Rome, Nov 19 - The eurozone is on the brink of deflation,said Salvatore Rossi, the Director General of the Central Bankof Italy on Wednesday. "The slowdown in prices pushes up realinterest rates, discouraging corporate investments and drivingdown loans; furthermore, it makes debt servicing more costly,"he said. "An inflation rate close to deflation now has aparticularly serious fallout in the eurozone, hinderingdeleveraging in countries with a high public or private debt,slowing down the readjustment of relative prices in thedifferent eurozone countries and also the recovery ofcompetitiveness and the elimination of external imbalances,wherever this might be necessary," said the Bank of Italy'snumber two at the Verona University campus in Vicenza. "Thereal problem lies in the fact that the euro is a currencywithout a state," he said. "The sovereign debt crisis has drawna demarcation line. It has highlighted that the incompletenessof European integration may jeopardise monetary policies,hindering their transmission between eurozone countries andundermining the functional independence of the central bank."The risks do not end there, he said. "The sovereign debt crisishas awakened a sleeping monster in Europe: mistrust amongnations is the most poisonous fruit of this crisis." (AGI) . .