The evidence actually points the other way: the benefits of price stability are elusive, the costs of getting there are large, and zero inflation may not be a good thing even in the long run.’ The observations of Prof. Krugman as they stand are not directed against price stability as an objective but are aimed against a policy which seeks ‘absolute’ price stability and attempts to bring down the inflation rate from around two per cent to almost zero.
From the launch of EMU, it almost halved its debt-to-GDP ratio, reducing it to 25 per cent in 2007. The recession more than doubled it. Furthermore, households and non-financial firms were highly indebted (their debt burden was about two and a half times GDP); the major Irish banks had balance sheet assets equal to five times GDP.