“Eurozone deflation is now inevitable. There is no way around it,” said Andrew Roberts, at RBS. “We think yields on German 10-year Bunds will fall to 0.42pc next year.”
“The ECB is presiding over a deflationary disaster. They need to act fast and aggressively or else markets will start to attack Italian debt. Italy’s nominal GDP is falling faster than their borrowing costs and that is pushing them towards a debt spiral,” he added.
The Bank of Italy’s governor, Ignazio Visco, said any further falls in prices at this stage could have “extremely grave consequences for economies with very high public debt levels, such as Italy”.