Consumer price inflation (CPI) plunged from 1.1pc to 0.7pc, the lowest since the financial crash in 2008-2009. "This is a massive downward surprise," said Gizem Kara from BNP Paribas.


"This is playing out in a very similar way to Japan in the early 1990s," said Albert Edwards from Societe Generale. "All it needs now is an unexpected recession and Europe will slide into outright deflation. The risk is a trade shock from Asia. That is when the markets will start to panic."


A former ECB governor said the bank's passive stance over the past few months was a "disaster" for Italy and Spain. The time-lag effects mean that serious damage has already been done.

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