The Relation between Economy and Inflation in Eurozone


World economy is in rising trend facing development in all three primary, secondary and tertiary sectors. The rise in purchasing power of middle-income family is one of the important contributing factors for economy development after the great depression. According to UN’s world economic situation and prospectus, global economy is improving but facing heavy headwinds from old and new industries. According to prospectus of global macro economy the performance in Euro region is emerging, United states are recovering healthy in the phase aftermath of crisis and China has put block to factors which slowdown the economy and accelerate its growth factors. As a whole, these developed countries are devising and implementing appropriate fiscal and monetary policies which make the global economic growth as 3.3 percent which was 2.1 percent in 2013.

Unemployment in Eurozone

The efforts to cut down the running inflation in many developed countries are important reason for the economic recovery which increases the purchasing power of middle-income otherwise it would eliminate the category of middle-income family from the economic structure who are almost half of the world population. The inflation in Eurozone is dipping to zero which is not considered as good economic sign in economic perspective which creates fear among the policy makers that it would create deflation and unemployment. However, the unemployment rate in Eurozone is constantly maintaining at 11.5 percent which comprises 24.4 million people including five million young people over a year as per report of Eurostat. European central bank claimed that there is contraction in Consumer price index of Eurozone which will instigate deflation out rightly in the market in 2015. According to Nicholas Spiro, managing director of Spiro Sovereign Strategy, London, the prevailing apprehension about the deflation in coming years and unemployment rate is symptoms of Japanification who faced economic stagnation in the last two decades, however, Japan as put an end to this decade long inflation but it seems the Eurozone is in the beginning phase.

Differential rate of inflation in Eurozone

World countries are performing well in managing inflation but it is dispersed in a dozen of countries across the world and countries among Eurozone is hotspot. According to Spiro, the unemployment rate in Greece and Spain is 26 percent and 24 percent respectively which reflects the economic damage in the form of combination of credit crisis and budget austerity. At the same time, other parts of Eurozone where countries such as Germany, Italy and France is facing unemployment rate of 4.9%, 13.2% and 10.5% as an outcome of work sharing and many other labour innovations to keep people employed. According to Vippi an instant loan provider, the constant inflation and employment rate prevailing in major economy of Eurozone is good sign for middle-income groups which increases their purchasing power and enables to settle credit. The current problem in Europe market is that it is lagging in demand. The important factors of GDP including private consumptions, business investment, government spending and net exports nothing looks favour which implies that it would accelerate further deflation. The other parts of world such as North America and northern Asia maintaining inflation below 10 percentage, however, southern Asia is in similar situation of Eurozone. Central banks and policy makers have to apply appropriate policies to develop employment coordinate with world countries for global economic growth.


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