It's completely overblown. Deflation is not like a black hole that sucks economies in once they cross the zero price change event horizon. Just because Europe's CPI increase is approaching zero doesn't mean the Eurozone economy is going to collapse or that something urgent needs to be done. Japan's problems over the years are commonly attributed to deflation, but that ignores completely the fact that Japan's fiscal policies have been abysmally bad for decades (e.g., way too much government spending). Deflation doesn't necessarily lead to recession or even slow growth. The U.S. economy boomed in the late 19th Century despite years (or actually because of) years of deflation; falling prices dramatically increased consumers' purchasing power and fueled a huge rise in living standards. Deflation is often necessary for an economy to adjust to external shocks.
In any event, although a decline in producer prices in September captured the headlines yesterday, there is no evidence at all that producer prices are falling. Producer prices are notoriously volatile from month to month, and the often decline in one month only to rise the next month. As the chart above shows, over the past year producer prices are up 2%, and they are probably trending higher at a 1.5% annual rate.
Take out falling energy prices, and you find that core producer prices—shown in the chart above—show absolutely no sign of declining.
Forget about the deflation bogeyman. Deflation is not a threat and it's not happening in any event.