The inflation rate of the euro area went below zero in September, down by 0.2 percent year-on-year. It dropped further by 0.3 percent in October, and has remained largely stable since then, according to the statistical agency of the European Union (EU).
"The negative inflation at -0.3 percent in December 2020 is due to two factors: a seven percent drop in energy prices, and the very negative inflation rate in Germany (-0.7 percent) in the wake of Merkel's political operation of lowering VAT," commented Herve Hannoun, former First Deputy Governor of Bank of France,in his tweet.
The negative inflation of the energy sector was compensated by the positive score of other components, such as food, alcohol and tobacco, as well as services, according to Eurostat.
The price of energy has suffered greatly from the halt of economic activity induced by the COVID-19 pandemic.
In Germany, the largest economy in Europe, Chancellor Angela Merkel had temporarily lowered VAT for the second half of 2020, a support measure to counter the economic fallout.
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