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For all the fears of Japan-style deflation, a more likely threat for Europe is what International Monetary Fund officials are calling "lowflation".With data Monday showing inflation about a quarter of the European Central Bank's goal of just below 2 percent, President Mario Draghi is under pressure to respond.The so-called five-year, five-year forward break-even rate, a gauge of inflation expectations in the five years starting 2019, remains around 2 percent.For now, Draghi is forecasting a strengthening economic recovery will eventually lift inflation, which the ECB sees averaging 1.3 percent next year and 1.5 percent in 2016 after 1 percent this year. Boone calculates that even if inflation remains subdued, debt burdens as a share of GDP will increase in the next six years by 24 percentage points for Spain, 21 points for Italy and 10 points for France, raising the risk of fresh fiscal austerity.Given the ECB's 0.25 percent benchmark, Greece faces a tighter inflation-adjusted, or real, rate of 1.15 percent after its consumer-price index dropped 0.9 percent in February.Sluggish inflation also hampers efforts to reduce unemployment, which at 11.9 percent for the euro area in February was just shy of a record 12 percent.
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