Flash: Germany and France

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To follow on yesterday's email, we learn today that Germany's and France's economies are slowing.

Paris, May 23 (Bloomberg) -- France and Germany, the two biggest economies on the European continent, reported slower-than- expected growth in the first quarter as a slump in exports forced companies to scale back production.

France and Germany account for more than half the economy of the dozen European Union countries sharing the euro. Still, their slowdown wasn't enough to push the European Central Bank to lower interest rates today, because inflation is accelerating.

Below is the exact conclusion as yesterday's email:

Conclusion:  Germany's weakness is another reason for the weak EURO ... Expect lower rates in Europe in the coming months to help the largest economy of the Eurozone.  Unfortunately there will not be many decreases as inflation is still very present.  Whereas the US has lowered rates 5 times so far (and will continue to do so), Europe has only lowered them once.

Regards

Jean-Paul Giacometti