Price Pressure In The Eurozone Adds To Calls For A 'Brexit'

Data out Wednesday showed that consumer prices in the eurozone fell 0.2 percent in December, something many believe is the beginning of a lengthy period of deflation within the bloc. Some eurozone companies claim that the damage from falling inflation has been offset by a weaker euro, but the bloc’s financial troubles are in danger of spreading to other parts of the world.

Related Link: What The Market Is Reading: Eurozone Deflation

This week, the U.S. Federal Reserve’s December meeting minutes included an uncharacteristic warning to the European Central Bank to step in and ease before the eurozone falls into another financial crisis.

'Brexit' Forthcoming?

In the UK, eurozone issues are more directly linked with the economy, making the deflation figures all the more troubling to British lawmakers. Prime Minister David Cameron has already threatened to hold a referendum on Great Britain’s membership in the EU, saying that its decision to join the Union has done more harm than good to the British economy. The British exit from the EU, a "Brexit," could be imminent.

Supermarket chains in the UK have been the hardest hit by falling inflation. J Sainsbury PLC announced that sales through March would likely fall under pressure due to declining food prices, while Tesco said it was planning to close 43 of its stores as they failed to turn a profit.

Upcoming Elections May Be Deciding Factor

Frustration with the economy coupled with increased immigration from eurozone states has the British Conservative party looking to hold a membership vote if they are returned to power in the May elections. Most are expecting the party to be elected and hold the vote, but for the majority to support a continuing membership in the EU.