FALLING energy prices are causing deflation in the eurozone, European Union statistics agency Eurostat revealed today.

Though lower petrol costs may benefit European workers suffering under a Brussels austerity drive that has cut or frozen wages, the “core inflation rate” excluding volatile items such as energy continued to rise, meaning prices for most goods are still going up.

The news increases pressure on the European Central Bank (ECB) to back a government bond-buying scheme to shore up the euro, which fell to a new low of 78p yesterday.

ECB chief Mario Draghi had hinted that he might pursue such a move — but Germany insisted it would block it, regarding bond-buying as a means to saddle Germans with the debts of other eurozone nations.

Europe’s austerity-driven recession has pushed countries such as Greece to the brink of collapse and raised tensions between deficit hawks in London and Berlin and the governments of France and Italy, which are signed up to austerity but favour slower cuts.

French Economy Minister Emmanuel Macron said yesterday that Germany had an “urgent responsibility” to invest more in the eurozone to restore growth.

He signalled that France’s Socialist Party government had finally given up on any pretence at representing a left alternative to German Chancellor Angela Merkel’s vision, boasting that his country was now a “haven for entrepreneurs” and assuring international fat cats that President Francois Hollande’s signature 75 per cent tax on earnings over €1 million (£780,000) — dropped last month — would not return.

“It’s over now, and finished,” Mr Macron said. The same could be said of Mr Hollande’s reputation as a socialist.