Deflation raises worries for EU's ex- tigers

The spectre of deflation is raising new worries for the EU's
ex-communist Baltic tigers, long afflicted by rampant inflation that
has now been smothered by the economic crisis. July data released on
Monday in Lithuania -- which is facing the deepest recession in the
27- nation European Union this year -- showed that consumer prices had
fallen for the fourth consecutive month. Compared with June, prices
dropped by 0.8 percent, figures from Lithuania's national statistics
office showed, as part of a deflationary spiral that one analyst
termed "a very deep hole" for the Lithuanian economy. Prices fell 0.1
percent in April from March, 0.2 percent in May from April, and 0.3
percent in June from May. Deflation -- a sustained drop in prices --
may delight hard-pressed consumers but it can wreak havoc on the
broader economy as households put off purchases, undermining demand
and in turn investment in new production.