EUROZONE: Greece Is "Functionally Bankrupt"; Faces Deflation.

NYTIMES/ News Analysis/      Greece will suffer years of austerity with its new $146 billion IMF/EU bail-out. "But there are serious questions about whether the deep cuts in salaries and benefits the agreement calls for are politically sustainable overtime, even as deflation will make it impossible forGreece to grow its way out of debt. There is a consensus that the Greek economy is broken needs major structural reform..."“How can Greece grow out of its debt if there is deflation?” asked Jean-Paul Fitoussi, a professor of economics at the Institut d’Études Politiques in Paris. “Deflation increases the debt burden, so we are following this virtuous circle that is bringing us toward hell. Economics has nothing to do with virtue, which can kill an economy.”

LATVIA: Deflation May Hit Economy.

BLOOMBERG/
The government is betting that by forcing down wages, lower consumer demand will curb inflation and bring it back in line with the euro countries.
Latvia’s inflation rate might actually be 1% deflation in October. It would be the first annual deflation since the country split from the Soviet Union in 1991. It had an inflation rate of 17.9 percent in May 2008.

Deflation Threatens US Economy And Interest Rate Rise.

BLOOMBERG/
"The U.S. faces the possibility of deflation for the first time since the Eisenhower administration, a threat that may prompt the Federal Reserve to keep interest rates near zero through next year."
“Disinflationary winds are blowing with gale-force effect,” said Chicago Reserve Bank President Charles Evans in a Sept. 9 speech in New York.