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Southern Mediterranean economies ‘could experience deflation’

The Greek economy could have a major deflationary impact on southern Mediterranean countries, an expert has claimed.

The Greek economy could have a major deflationary impact on southern Mediterranean countries, an expert has claimed.

Stuart Thomson, economist at Ignis Asset Management, has claimed that the resistance in Germany and Holland to providing taxpayers’ money to this country could result in a drastic internal devaluation.

In addition to these countries, Ireland is also in line for this type of measure, which would be designed to restore competitiveness, he asserted.

Mr Thomson added: “The pain of this devaluation can only be lessened through depreciation of the euro to parity against the dollar. However, this requires Germany to accept higher domestic inflation and consumer spending.”

He suggested that this would only add to the complexity of the issues that are surrounding this crisis, which he described as “not insurmountable”.

Earlier this month, Barclays Wealth reported that hedge funds have been exhibiting concern about the Eurozone markets due to the Greece situation, although it claimed that this has been creating opportunities.

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