http://www.cnbc.com/2015/09/05/euro-zone-deflation-risk-contained-bank-of-italy.html
It looks likely that the European Union will not experience deflation this year but could still have "very, very low inflation" which is still a problem. The European Central Bank (ECB) expects inflation of 1.1 % and GDP growth of 1.7% in 2016. The Greek crisis was definitely a factor in the volatility of the European economy and the exchange rates. The ECB has stepped in to hopefully correct and stabilize the economy to some extent.
It is expected that the ECB could continue its quantitative easing program past September 2016, which was the original plan, if necessary. This is an example of the government and stepping into the markets and helping to stabilize the economy. If they do not do this the situation could be much worse but it also is a situation of government interference in the markets. The problems would eventually be solved by the markets if left as is but with must more volatility.
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Not only that, but with this really low inflation on the EU, people and businesses may likely postpone purchases, seeing that the same or lower price will be available in the future. This lowers consumption which is the economies main fuel.
In addition to the problems within Europe, this lack of purchasing by Europeans has caused a weak global economy, which in turn is affecting the American economy. This weakened global economy has affected the import prices in the U.S which has caused the FED to determine whether or not to raise interest rates, something that hasn't been done in a decade.
The European Union has been stepping in in order to keep the euro strong, and the whole ordeal with Greece didn't help at all, it made the euro weaker. Thankfully they never reached deflation territory and the euro is currently becoming stronger rivaling the pound! In this case the EU could not leave it up to laissez-faire and had to come to the aid of the euro, thankfully the quantitative easing has been helping.
While the Euro has been strengthening over the pound in recent weeks due to the European Union's plan of action, quantitive easing, I think the biggest problem the European Union faces today lies with Greece. Greece is still a country dealing with copious amounts of debt... due to this, any plan to help save the economy in Greece goes to paying off their debts rather then to help strengthen the economy. In short, Greece cannot survive without the help of another country. So, with such a volatile country involved in the European Union, how will the Euro ever get better? Is it better for Greece to do away with the Euro and create a new currency?
It may be beneficial to the EU for Greece to leave but is this a bad precedent to set for the European Union. It could set a bad precedent for the EU as any country that does poorly will get kicked out. This could make the union look weak due if they are unable to sustain a country going through economic issues. I understand Greece is a rare circumstance but to show the strength of the EU, I think keeping the union together would be the best.
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