Business

Germany’s Upcoming Court Ruling Will be Huge for the EU

Germanys Upcoming Court Ruling Will be Huge for the European Union

Members of Germany's Federal Constitutional Court Photo AP

On September 12, the German Constitutional Court will rule on whether the European Stability Mechanism (i.e. the bailout fund) is compliant with the country’s constitution, Business Insider’s Joe Weisenthal reports.

Should the court rule in favor of the ESM, then the bailout fund will become operational and available to all the ailing nations in the eurozone. However, should the court fail to ratify the bailout fund, well, then EU leaders will have to come up with something else.

And while most analysts say there’s a very slim chance the court will shoot down the plan, Morgan Stanley’s Elga Bartch says those chances are greater than you think. In fact, Bartch says there’s a 40 percent chance the court won’t approve the ESM.

“That‘s a really big chance of a negative blow to what’s seen as a decisive piece in the puzzle,” Weisenthal notes.

But let’s go back for a moment and examine what would happen if the court votes down the bailout fund. Morgan Stanley’s Laurence Mutkin and Elain Lin give us a little insight:

Should the ESM ratification fail, the immediate reaction would be a sharp rise in the pricing of systemic euro-sovereign risk. Furthermore, the conditionality expressed by ECB President Draghi at the August ECB press conference means that if the ESM were put on hold, the ECB would struggle to justify active intervention in sovereign markets.

This should lead to a widening of peripheral sovereign spreads to levels seen before the August ECB meeting, and a concomitant re-flattening (bear flattening) of the credit curves.

However, the outlook for the very front end of peripheral sovereign curves is more complicated. On the one hand, the market could continue to price in some hope of ECB intervention at the short end of yield curves, notwithstanding the expressed conditions of the “Draghi put”, as without them, the outlook for convertibility risk would rise very sharply. On the other hand, short-maturity peripheral yields have already fallen by 100-200bp and the short ends of peripheral curves have already steepened a lot since the “Whatever It Takes” speech; as we think that a positioning at the front end is already relatively heavy.

Simply put, months of work (i.e. arguing and haggling) by EU leaders would be undone and one of the last remaining options to deal with the global financial crisis would be null and void.

Follow Becket Adams (@BecketAdams) on Twitter

 Front page photo courtesy the AP.

Comments (53)

  • Dallasmarine
    Posted on September 2, 2012 at 9:23pm

    I still have loose change from trips in the 80′s in Marks. Maybe I can buy Italy if the price in right.

    Report Post »  
  • discus02
    Posted on September 1, 2012 at 6:20pm

    Germany should pull the plug on Greece and any other blood suckers in Europe. We will take care of the nitwit in Washington in November!

    Report Post »  
    • RWCT
      Posted on September 2, 2012 at 4:33pm

      I believe, and correct me if I am wrong, but JOE is incorrect. The German court said they were delaying their ruling until October[under great pressue from the Euocrats, one must assume]

      Report Post »  
  • SilentReader
    Posted on September 1, 2012 at 4:38pm

    We all know that the EU-UN-NATO enforcer, IMF, and the Hague are all Nazi and fascist-founded institutions of unaccountability. Case in point. Kurt Waldheim, the fourth Secretary General of the UN, was a Nazi who participating in the murder of a whole village in the mountains of the former Yugoslavia. And one EU founder was heard saying that we can’t find enough Jews to kill but Serbs will do. They should be dismantled and their aging globalist manipulators with impunity should be put behind bars.

    Having said that, if the German Constitutional Court shoots this European Stability Mechanism down they would be doing all those bankrupt countries ruled by the EUs tyranny a huge favor.

    And I suggest that the countries in the EU assert their sovereignty and withdraw as soon as possible, and recognize that the EU and their unelected bureaucrats of unaccountability are the problem. The whole problem. And nothing but the problem.

    Report Post » SilentReader  
  • Arshloch
    Posted on September 1, 2012 at 1:57pm

    EU my prat. There is NO reason that the hard working frugal German population should be expected to bail out the fools who spend, retire early and live on government alms. After the French election, they too fall into the gimme group. Let the bas***ds starve.

    Report Post » Arshloch  
  • Maxim Crux
    Posted on September 1, 2012 at 1:52pm

    They will bail out the EU, Germany will go into a Nazi Revolution and as a result, The people will elect another Hitler who will disband the republic constitution once again and will dominate all of Europe except for Britain which will go to war with each other and the world will once again be at war with itself. History repeats once again

    Report Post »  
    • MatrixRedPill
      Posted on September 1, 2012 at 9:41pm

      I don’t know how German government will manage to rule the Greeks, Italians, Spanish…. Their own people cannot even manage to do that. Especially, trying to make people work hard when they were born into Socialist Welfare society. Hmm… common sense tells me, it won’t work. Poor German people, having to deal with hot potatoes.

      Report Post »  
  • Mike Austin
    Posted on September 1, 2012 at 12:03pm

    The German people better make themselves heard now or they will be footing the bill for some fat lazy greek who retired to the beach after a few yrs cutting hair since it is considered a hazardous job.

    Report Post »  
  • SILAS
    Posted on September 1, 2012 at 11:31am

    Kool outfits

    Report Post »  
  • bikerdogred1
    Posted on September 1, 2012 at 9:28am

    The Germans are a great people,their dreams come true.The French,they can run like hell.

    Report Post »  
  • Micmac
    Posted on September 1, 2012 at 4:03am

    My daughter lives and works in Italy. 2 weeks ago I had her take her savings out of Euros. Germany has Europe where it wants it, but what a price it has had to pay. Actually it’s Greece who needs to be printing its own currency. If it goes it will go fast and Greece will be the 1st blow. Spain with its massive unemployment 2nd with massive rioting. Expect massive currency deflation, as this is inevitable, but is necessary to find a stable level that will allow future recovery.
    When the Euro was created this exact situation was predicted by the creators, now still in charge as the technocratic leaders/advisors. The thought was that at the collapse they could create an unified Europe governed by the EU and ECB, of which they would be the leaders. Sound familar?

    This is simplified but gives a cursory overview.

    NoBama > MoBama

    Report Post »  
    • nzkiwi
      Posted on September 1, 2012 at 7:51am

      You offered your daugter very wise advice, Micmac.

      A currency is only as valuable as the confidence that its users place in it. Confidence in the Euro is eroding weekly.

      Thed Euro was created, not by need, but by people that believed that it would advance their ideology. They created it without the base discipline and benefit that is the imperitive of currency. The USA had many currencies that vied for primacy, but all lost confidence and value related to distance from the issuer.

      Hence the arrival of the greenback supported by gold. It survived on the confidence of the people trading in it because, back then, it was redeemable in rare metal.

      Again. you are right in your advice. The Euro is losing value because people are beginning to distrust its surety. This is because money is being created out of thin air. Printed. Leveraged. There is little behind it and people now know this. After the war, Europeans used wheelbarrows to carry the money necessary to by food, because lack of trust caused skyrocketing inflation.

      The real problem is that all international markets are interlinked and interlocked. No-one will escape the fallout. Those with their own currency and home production base will do better than most.

      All will be hurt.

      Report Post »  
  • cemerius
    Posted on September 1, 2012 at 2:53am

    Wow! So, if they vote against the bailout does this mean the Euro will FINALLY be valued less than the dollar? I can’t believe such a horrible idea called the Euro was valued more than the US Dollar from day one!?!?! The Italian transformation to the Euro was like giving a billion dollars to a three year old ABSOLUTELY no concept to the conversion!!!!!

    Report Post » cemerius  
  • Apple Bite
    Posted on September 1, 2012 at 1:14am

    The Germans will riot if the court okays the ESM. If you’ve never met a pissed off German, now is not a good time to meet one.

    Report Post » Apple Bite  
    • starman70
      Posted on September 1, 2012 at 8:23am

      I agree totally! If I were a German citizen, I would be totally against my country bailing out other countries because of their failed socalist policies. 40 hour workweeks, retirement with full benefits at 50, pandering to outrageous union demands & the list goes on and on. The German people are some of the most intelligent, innovative and hard working people in the world. What they have gained as a country, they have gotten through hard work and personal integrity.

      The German people have every reason to be upset that their leadership would even consider bailing out any other country. It would be the same if the USA was going to bail out any of these countries – - – were broke and cannot afford to bail out ourselves no less than some other country.

      Report Post »  
    • SolitudeBliss
      Posted on September 1, 2012 at 8:51am

      As a german born woman (but proud American citizen by choice), you’re absolutely right. Do NOT piss off a German.

      Report Post »  
    • Rothbardian_in_the_Cleve
      Posted on September 1, 2012 at 8:53am

      Actually, they won’t. Germans are sheep. They do what their government says no matter what…kinda like some people on this site.

      Report Post » Rothbardian_in_the_Cleve  
    • WindyDualism
      Posted on September 1, 2012 at 8:24pm

      Roth in Cleve
      So you as the ever independand indy, have started paying taxes a la carte and don’t mind the stupid mph postings? You are off grid completely and have no use at all for being lumped into a completely false pretense of “those people”. Wow. When is your how to book hitting the shelves and how did you get out of taxes on that one? Such insight.

      Report Post »  
    • woodyee
      Posted on September 2, 2012 at 4:38am

      to Starman –

      We ARE bailing out other countries; we give billions every year to the Palestinians which gets doled out like welfare. We’re bailing out the Mexicans, and have been for a few decades; illegals transfer billions every year to Mexican banks, and Gaybama is helping the Sinaloa cartel get drug shipments safely to the NE USA. The gobblement steals from our treasury to give to the IMF; and we provide a defensive shield to the very Europeans that have so little regard for us and our military…

      Report Post » woodyee  
  • cookcountypatriot
    Posted on September 1, 2012 at 12:27am

    this is the way world wars are started……

    Report Post » cookcountypatriot  
    • Sirfoldallot
      Posted on September 1, 2012 at 12:51am

      Look’s like this maybe the only way 2 stop this madness.

      Report Post » Sirfoldallot  
    • sheik
      Posted on September 1, 2012 at 5:14am

      you need an army to start a war. The EUro dim bulbs relied on the U.S. to do the defence thing.

      Report Post » sheik  
  • woodyee
    Posted on September 1, 2012 at 12:07am

    Had the Germans, among other EuroNations, not surrendered their sovereignty, this story would be moot.

    Liberty – one reason why our Nation has accomplished so much good in so short a time, and the lack of it, coupled with utter ignorance, is the reason why EuroNations TEN TIMES OLDER than ours still flounder in malaise…

    a lesson no one but the Left ignores.

    Report Post » woodyee  
    • The_Almighty_Creestof
      Posted on September 1, 2012 at 12:31am

      And here I thought it was from them all being rather small countries with nothing to offer an adventurous, young & growing population, leaving nothing but aging pensioners who no longer contribute to the nations finances.

      Report Post »  
    • Twobyfour
      Posted on September 1, 2012 at 1:27am

      Almighty, it’s a combination of factors. The demographic factor is not yet pronounced, but in 30 years, it spells a serious trouble, unless reversed and I can’t see how. Import of non-assimilated/non-assimilable populations is not the solution.

      Report Post » Twobyfour  
  • nobull14
    Posted on August 31, 2012 at 11:25pm

    If Germany is smart they will start printing Deutsche Marks as soon as possible like Glenn Beck said a year ago !!!!!. The rest of the euro crap is going down the tube sooner than later.

    Report Post »  
  • wisehiney
    Posted on August 31, 2012 at 10:43pm

    Those are Anglo Saxon ancestors. Yes, Northern Germany to Southern England to America. The only who have never even been nearly defeated. Never to be. The Roman hired us to defend Rome during the last few hundred years of their decline. Magna Carta. July 4. At least know from whence they came. Frederick the Great. George S Patton. Please do not believe the weaklings who lead you. The Cavaliers live and prevail.

    Report Post »  
    • Elena2010
      Posted on August 31, 2012 at 10:52pm

      1066

      Normans came across and killed Anglo-Saxon king Harold. Then they ran British affairs for a dynasty or so before surrendering it to various Germans, to incl the current House of Windsor.

      Report Post » Elena2010  
    • jumbles
      Posted on August 31, 2012 at 11:02pm

      Actually after the Normans the Monarchy was in the hands of Anglo French families.The Normans residedin France but were of Scandinavian descent,The German kings did not appear in British monarchy until the 18th century with the coronation of George I of the Hanoverian dynasty.

      Report Post »  
    • wisehiney
      Posted on August 31, 2012 at 11:06pm

      Exactly, and William The Conqueror’s direct ancestor, William Barrett Travis gggg grandson lives here in my hometown in NC. His ancestor fought side by side with mine in the Alamo.

      Report Post »  
    • Elena2010
      Posted on August 31, 2012 at 11:10pm

      I was unaware that the Tudors and Stuarts were of French descent. Thanks.

      Report Post » Elena2010  
    • wisehiney
      Posted on August 31, 2012 at 11:14pm

      Often great men have weak descendants. Not this one.

      Report Post »  
    • jumbles
      Posted on August 31, 2012 at 11:24pm

      The Tudors and Stuarts were not of French descent,I used the term Anglo French to describe families from both countries.The Plantagenents were French the Tudors were home grown and the Stuarts were Scottish.Anglo french is a loose term as The English kings also ruled France.It is a long and complicated history and I was just pointing out when the Germans were introduced but I do detect some sarcasm you naughty tiger.

      Report Post »  
    • Elena2010
      Posted on August 31, 2012 at 11:39pm

      Jumbles — not tonight, no…maybe tomorrow…

      Report Post » Elena2010  
    • wisehiney
      Posted on August 31, 2012 at 11:46pm

      You folks are more fun than a barrel of….why do y’all sound so sober at this hour? Don’t believe everything that they teach you at those ivy league schools. Our best and brightest are cheaters, you know?

      Report Post »  
    • wisehiney
      Posted on August 31, 2012 at 11:57pm

      But on second thought, some shriveled little weenie has to stay behind and write the second hand history, as told by the hero. Make sure you get the real story. The little weenies like to rewrite the real story.

      Report Post »  
  • jumbles
    Posted on August 31, 2012 at 10:38pm

    If this happens Obama will be to blame because he once took golf lessons from Martin Boorman and put German Mustard on his hot dog,and of course he is a Nazi communist gay lesbian non citizen who doesn;t sign his letters personally.

    Report Post »  
    • pissantno.10
      Posted on August 31, 2012 at 11:06pm

      ya so so right but you may have forgot a few things keep working on it

      Report Post »  
    • DarkJello
      Posted on September 1, 2012 at 3:05am

      Yep. Those were just random letters. Maybe he thought it was a Netflix bill?

      Report Post » DarkJello  
  • Snowleopard {gallery of cat folks}
    Posted on August 31, 2012 at 10:32pm

    So on the 12th there is a chance the deal will not go through; and on the 13th the Euro may collapse or there will be the first moves for another European War.

    Report Post » Snowleopard {gallery of cat folks}  
    • Elena2010
      Posted on August 31, 2012 at 10:52pm

      Meanwhile our currency is being “eased” again, meaning we all go down the toilet together!

      Report Post » Elena2010  
    • wisehiney
      Posted on August 31, 2012 at 11:08pm

      Super SnowLeopard. It is a good time to ease over a little closer to the exit.

      Report Post »  
    • pissantno.10
      Posted on August 31, 2012 at 11:08pm

      relax they have lots of wine over there we will just move to the wine standered hic

      Report Post »  
    • hidden_lion
      Posted on September 1, 2012 at 9:08am

      elena-
      We really have no currency. Our dollar is backed by nothing, It is pure fantasy with a value of zero. The only thing that could save our economy and that of the rest of the world is a global financial reset. All debts erased. All currency reset to a base amount. Everybody could keep all their physical assets, but anything kept in electronic lala land should disappear. All cash would be turned in and exchanged for the new money backed by gold. Stock markets should be acknowledged for what they are, “horse racing” i.e. Gambling and should not be used as a basis for the economy.

      Report Post » hidden_lion  
  • sooner12
    Posted on August 31, 2012 at 10:25pm

    I don’t care.

    Report Post »  
    • jumbles
      Posted on August 31, 2012 at 10:46pm

      That is because you do not have a brain and you think that the world ends around Americas coastline and borders and what happens in the rest of the world will not affect you.By the way Germany is in Europe which is a continent and they speak German there.

      Report Post »  
    • Elena2010
      Posted on August 31, 2012 at 10:54pm

      You will Okie…the world’s economy is all tied up together in one messy ball! The Chinese will care. The Japanese will care. Even the Russians will care.

      If Europe got toes up, it won’t be long until we are all swimming the backstroke down the financial toilet.

      Report Post » Elena2010  
    • pissantno.10
      Posted on August 31, 2012 at 11:18pm

      i did not know germany had its own continent cause when i was there there seemed to be a bunch of countries and darn if they all did not speak german but shoot i not a super genuis like jumbles

      Report Post »  
    • wisehiney
      Posted on August 31, 2012 at 11:20pm

      What do they call pall bearers in OK? CarryOkies

      Report Post »  
    • jumbles
      Posted on August 31, 2012 at 11:29pm

      PISSANT…..are you drunk or just really stupid.

      Report Post »  
    • wisehiney
      Posted on August 31, 2012 at 11:32pm

      Hold on Jumbles, it is taking a bong hit.

      Report Post »  
    • pissantno.10
      Posted on August 31, 2012 at 11:57pm

      its hard for you to be humble when you are just so darn brillant and yes i have had a glass or two of some very nice red wine.

      Report Post »  
    • Rothbardian_in_the_Cleve
      Posted on September 1, 2012 at 8:55am

      That‘s because you’re a fool.

      Report Post » Rothbardian_in_the_Cleve  

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