Euro zone inflation falls again amid deflation fears

Five Euro Note

Euro zone inflation fell more than expected in July, according to new figures released on Thursday, sparking renewed fears of deflation.

Official flash figures showed that inflation rose by 0.4 percent compared to the same period last year, failing to match expectations of 0.5 percent in a Reuters poll. It is the lowest level seen since October 2009 and below last month's reading of 0.5 percent.

The euro zone data follow some disappointing figures on Wednesday, which saw Spain slide into deflation - where the growth in consumer prices turns negative and begins to fall. Germany - considered to be the powerhouse of the region - saw its rate of inflation slow to 0.8 percent, following on from last month's reading of 1.0 percent.

Read More New hope for euro zone as yields hit record lows

The European Central Bank (ECB) sees inflation as a key metric in gauging the state of the euro zone, and announced a slew of measures back in June to try and spur on the region's flagging economy. Many analysts fear deflation could lead to a downward spiral, with consumers holding off on purchases in the expectation that prices could fall further. Others see deflation as a natural rebalancing within the region, believing that consumer prices need to slide to counterbalance an overly-strong euro.

Mario Greco, CEO of Italian insurance company Generali, told CNBC on Thursday that the euro zone is "probably" already in state of deflation.

Read More Euro zone business activity rebounds, France lags

"The European situation is quite concerning," he said. "I mean the labor situation in all of Europe, you know, is not moving. It's not moving good at all."

Greco said he believes that even the German economy could not be considered to be satisfactory following on from the sovereign debt crisis of 2011. Europe needs reforms and a new vision for the future, he added.

Follow us on Twitter: @CNBCWorld

Bank Workers CharityBank Workers Charity - Supporting bank workers

Register for Financial Markets News Alerts