Market Plunge Guaranteed With Critical German Vote Tomorrow; Merkel Warns Of EMU Failure If Bundestag Vote Doesn't Pass
Just like two Thursdays ago the market plunged to give Europe a heads up on what will happen if the $1 trillion bail out contemplated that weekend is not passed, so in advance of tomorrow's critical Bundestag vote to ratify the European aid package we will likely see another unprecedented market collapse. Why critical? Dirk Schumacher from Goldman explains.
Merkel warns of failure of EMU - Bundestag to vote tomorrow on help package. In yesterday's debate in the Bundestag of the €750 billion help package chancellor Merkel warned that "a failure of the Euro would be a failure of Europe" and that the current crisis is "existential" and that "this test needs to be passed". No doubt that these dramatic words are meant for those coalition MPs that haven't been fully convinced yet to approve the help package in the Bundestag tomorrow.
The ruling coalition of CDU/CSU and FDP has 332 seats in the Bundestag while the opposition has 290 seats. Several MPs from the coalition said that they will vote against the bill but we see only a very small risk that the bill fails in the Bundestag on Friday. Note, that a majority of votes cast is sufficient for an approval, which means that any abstention from opposition MPs effectively counts as a "yes". Judging from yesterday's debate it is not clear how the opposition will vote, but we are sufficiently confident that MPs are aware of the seriousness of the situation. The Bundesrat, the second chamber of parliamanet, will also vote on the bill Friday afternoon. There is also only a very small risk that the bill will not be approved. FT Deutschland is citing the representative from Baden Württemberg saying that "there is little doubt that the bill will pass". Note, that the majority in the second chamber has not changed yet despite the loss of CDU and FDP in the state of NRW as the new NRW government has not been formed yet.
There will be a G20 conference in Berlin today on financial market regulation. No official statement will be published afterwards and most finance ministers from the G20 are missing, though French finance minister Lagarde and EU Commissioner Barnier will be present.