Spain’s economic problems deepened after it was revealed that the inflation rate there went down to zero in June.
Spain is the fourth largest economy in the eurozone, but its double-dip recession in 2012 resulted in more than a quarter of its working population without jobs.
Without salaries, domestic demand inevitable falls. Businesses have felt obliged to lower their prices to attract customers. This leaves those businesses with lower profits, hindering their ability to pay their suppliers.
The country’s National Statistics Institute said consumer prices had not changed since June 2013. A fall in property prices and in clothing have helped drive down inflation.
In June average inflation in the eurozone was just 0.5%, prompting the European Central Bank into some action, becoming the first major central bank to introduce a negative interest rate on bank deposits.
Analysts fear the possibility of Spain entering into deflation. If so, it would join Portugal, Cyprus and Greece.
