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Europe’s disinflation isn’t a worry: Eurogroup President

Worryingly low inflation in the euro zone may have spurred deflation fears, but it's actually a sign that the region's economy is recovering from its crisis, Eurogroup President Jeroen Dijsselbloem told CNBC.

"The relatively low inflation at the moment is part of the phase which we are in, which is dealing with some of the macroeconomic problems," said the leader of the forum of the EU's finance ministers.

(Read more: Fewer worries but big problems remain for Europe)

"If you strengthen your competitiveness, if you manage to bring back the cost of labor – and a number of Eurozone countries are doing exactly that at the moment – it inevitably leads to a lower inflation," Dijsselbloem said.

"The lower inflation is part of the economic recovery and the restructuring and it's inevitable. I'm not particularly worried that it'll go further," he said.

In December, consumer price inflation in the region was only 0.8 percent year-on-year, below expectations, after rising only 0.9 percent in November and still only slightly above October's 47-month low of 0.7 percent, adding to concerns deflation might emerge.

Louisa Gouliamaki | AFP | Getty Images

Dijsselbloem's unconcern with the data echoes comments from European Central Bank President Mario Draghi, who on Thursday left rates unchanged, saying December's weak inflation was partly due to a technical change in data collection in Germany. He said he didn't expect a rise in inflation.

"We may experience a prolonged period of low inflation to be followed by a gradual upward movement towards inflation rates below but close to 2 percent later on," Draghi said at the press conference, according to Reuters.

To be sure, some do see reasons to be concerned about the low inflation.

(Read more: Draghi: Too soon to declare euro zone victory)

"We're stuck with close to a deflationary position in the euro zone through this year. It is simple demand and supply," Richard Martin, managing director at IMA Asia, told CNBC.

"If you look at the retail sales number s, if you look at automobile sales they're still very weak or even contracting in year-on-year terms. And so we have excess supply out there and it means there's constant downward pressure on prices in the euro area, which makes it very, very difficult to get a recovery going."

While Draghi was clear that it was "premature to declare any victory" regarding the end of the euro zone's financial and economic crisis, Dijsselbloem was more optimistic.

(Read more: Europe's banking plans: Backstops and bail-ins)

"All the indicators in the economy in Europe are showing a positive development. Some are strengthening even faster than we hoped," he said.

"There's a lot of work that still has to be done. There is an opportunity now to pick up on that growth, but it needs further domestic demand, it needs strengthening of credit and that's exactly what we're working on," he added.


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