Actually, we do not have to rely on vague projections anymore: a considerable part of the once expected benefits has already become a reality. Supported by intensified trade, the stabilization of expectations and the decrease in interest rates, Bulgaria and the new EU Member States are experiencing an impressive catching-up process, with economic growth rates significantly above those of the euro area.
Indeed, history shows that deflation can be just as damaging to the prosperity and stability of our economies as high inflation. To mention just some of the negative impacts, in a low inflation environment firms’ revenues fall but the wages they pay their employees are typically more “sticky”, so the real wages they have to pay rise. That can lead to higher unemployment.