The market has shown signs of euphoria over the prospects of historical fiscal drive in the largest economy in Europe.
However, as Deutsche Bank warned, the debt brake reform planned by German government candidates was far from the agreement made and there was a “sufficient” risk of execution.
Although the basic case is reform to be passed, DB warns that the process cannot be smooth, and market volatility can increase when the March 24 deadline approaches.
To move forward, two -thirds of the majority in the Bundestag and the Bundesrat are needed to remove constitutional amendments before the new parliament was held on March 25.
“The majority are not guaranteed,” he said.
“A number of other parties, including green, have political incentives to push this vote to the edge of the cliff. This political risk is also translated into legal risks, “he added.
And here we come to an extreme scenario, where the Constitutional Court stopped voting before the end of March, citing inadequate time for deliberations.
“This will effectively weaken the debt brake reform in the parliament that comes out,” wrote DB.
Source: Reuters (Danilo Masoni)
