An article from Ambrose Evans-Pritchard in the UK Telegraph:
The risk is rising that the German constitutional court will severely restrict the eurozone bond rescue scheme for Italy and Spain, and may reignite the euro debt crisis by prohibiting the German Bundesbank from taking part.
The Frankfurter Rundschau newspaper reports that the verdict has been delayed until April due to the complexity of the case and “intense differences of opinion” among the eight judges.
referring to the European Central Bank’s back-stop plan for southern Europe – known as the OMT
Bank of America says there is a “relatively high” risk that the Court will rule that the OMT is illegal as designed. “The Bundesbank might be prohibited from participating,” said the bank’s German analyst Tobias Blattner in a report.
the Verfassungsgericht (the German Court) has no jurisdiction over the ECB, but it can force German institutions to withdraw support for EU operations
The ECB’s rescue policies would lose all market credibility instantly without German backing
Bank of America said the Court is unlikely to pull the plug altogether on the OMT, but a negative ruling would greatly strengthen the position of eurosceptics in Germany and risk a fresh bond sell-off. “Any market reaction will necessarily depend on the details. Even in an extreme scenario we would expect the ECB to calm the markets by announcing alternative tools,” it said.
More at: Rising risk that German court will block Bundesbank rescue for Southern Europe
Court can force German institutions to withdraw support for EU operations, wrecking market credibility for the ECB’s rescue policies
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On the other hand … if the decision looks like it is delayed until April ... maybe the euro goes up until then?
And h/t to DaveO in the comments here for the link to AEP’s article
