Economists fear deflation more than inflation, though inflation is more common. The falling prices in deflation sound like a good deal, and they are if your income is constant or at least not falling as fast. Unfortunately, debt doesn’t fall. As prices fall, revenues drop, profits drop, yet debt payments stay the same. Defaulting on debt was bad enough during the housing crisis. Deflation can trigger far larger and more pervasive defaults. Europe is possibly closer to deflation, and already has a debt problem. Europe’s finances, and any country’s finances, benefit from inflation through higher taxes. The opposite may happen, and there’s little resilience in the system.
“Deflation And The Euro Zone” – New Economics
Pretending Not To Panic 