This is fertile ground for a pernicious negative spiral, which then also affects expectations. Propagation through the euro area So do we see any signs that low inflation might propagate through the euro area in this way? On aggregate, euro area firms and households do not seem to be particularly exposed to debt deflation dynamics.
The interest payment burden of euro area firms – the ratio of their gross interest payments to gross operating surplus – has actually fallen from 22% in 2008 to less than 12% at the end of 2013, which suggests that firms are in a stronger position today to withstand a period of low inflation.