The euro zone is not in deflation

The ECB’s choices (zero or negative interest rates at least until the end of the first half of 2020) could suggest that the euro zone is in deflation. But this is not the case: demand is strong, unemployment is falling rapidly, real interest rates are low (in a deflation, real interest rate are abnormally high which depresses demand), wages are accelerating. There is clearly no deflation in the euro zone. Yet, t he euro zone has two characteristics that we find in a deflation: Inflation is low, but this is explained by companies’ weak pricing power (their capacity to increase prices) and not by a deflationary dynamics , since labour costs are accelerating; The euro zone's external surplus is very large , which is explained by the excess savings in Germany and in the Netherlands, but this is not prevent ing unemployment from returning towards structural unemployment.