The following excerpt is from a great financial review newsletter called “Investors Insight” edited by John Mauldin. You may subscribe to this FREE newsletter by going to www.investorsinsight.com .

"Germany's GDP was flat in the fourth quarter and up only 0.2% for all of 2002. Growth for the last seven quarters was virtually non-existent as weakness was pervasive. Consumer confidence is at the lowest point since 1995, and the government is trying to avoid violating the EU's budget deficit limit for the second straight year. Net exports are being hurt by weakness in the country's major export markets and strength in the Euro, which has risen 24% over the past year." (Comstock Partners)

The jobless rate in Germany rose to 10.5% from 10.3%, the Bundesbank said.

"The economy is in a dismal state," said Hans Erwin Bauer, chief executive officer at HeidelbergCement AG, Germany's largest cement company. "We've dismissed workers and closed factories year after year. An end to this recession is not in sight." Politicians talk recovery in Germany. Businessmen are far less upbeat.

Wim Duisenberg, the European Central Bank's president, said last week that he had abandoned his forecast for a rebound this year. Reports this week have shown Germany's economy stagnant, Italy expanding at the slowest pace in almost a decade and Spain's growth rate is less than half what economists had predicted.

Consumer confidence is down almost everywhere throughout Europe, although most stories blame the poor showing from the public on the approaching Iraqi conflict. The European services industry, the largest part of the region's economy, shrank in February for the first time in five months.

Inflation is running about 2% in Euroland, and dropping. Since the ECB target is 2% or below. The IMF projects that Europe will grow by only 1.3%, with much of that hoped for growth coming in the second half. Because of this economic weakness and favorable climate, 2/3 of economists were predicting a rate cut of 50 basis points. The actual cut was a very conservative 25 basis points, which will no doubt disappoint many people.

There are numerous stories from a variety of courses about the difficulties the "Stability Pact" is creating for Europe. When the common currency regime was born, this pact was created to govern future government and central bank actions. It set guidelines for government deficits and inflation. These guidelines severely limit the ability of a government to respond to an economic slowdown in its own back yard.

Now that a recession is staring some of the individual governments in the face (like France and Germany), they simply ignore the agreement to which they insist other European partners adhere.”

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