Greece emerged from 33 months of deflation in December, finally seeing some price rises after a bruising period of economic decline and political upheaval.

Inflation calculated to European Union norms rose 0.4 per cent in December, topping forecasts, data from the country's statistics service showed on Wednesday.

But the headline consumer price index using Greece’s local methodology fell 0.2 per cent year-on-year in December, although the annual pace of deflation decelerating from the previous month.

For years an inflation outlier in the euro zone, Greece has been in deflation mode for the last two-and-a-half years as wage and pension cuts in return for bailout aid and a protracted recession took a heavy toll on Greek households’ income.

Deflation in Greece, which signed up to its first international bailout in 2010, hit its highest level in November 2013, when consumer prices registered a 2.9 per cent year-on-year decline.

Foods, non-alcoholic beverages, healthcare, transportation, hotel and restaurant prices drove the EU-harmonised inflation index higher in December, the data showed. Economists polled by Reuters had forecast an annual rate of 0.2 per cent for December.

"EU-harmonised inflation is expected to remain in slightly positive territory over the first half of this year, though base effects from the VAT (value added tax) hikes will start to abate from July onwards," said Eurobank economist Platon Monokroussos. He said a gradual pick up in consumer prices during the summer months re

flected the impact of increases in value-added tax rates. “The VAT hikes are offsetting deflationary forces stemming from a still huge output gap,” Mr Monokroussos said.

Greek-calculated consumer prices fell by an average of 1.4 per cent in 2014 compared with a year earlier. Annual euro zone inflation was revised up to 0.2 per cent in November, rising slightly more than expected because of a slowdown in the decline of energy prices.

Reuters