Are The Krimson Karlsruhe Knights About To Say Ni-en?

Tyler Durden's picture

On Wednesday the German constitutional court, aka the KKK (Krimson Kardinals Of Karlsruhe, any association with other acronyms is purely accidental), will decide if Europe stays or goes. There is some possibility Karlsruhe may delay the September 12 decision even further, following a new complaint by a Merkel conservative, Peter Gauweiler who said in a statement on Sunday the fund should not be ratified unless the ECB rowed back on its plans to make unlimited purchases of sovereign bonds, since that he said, posed a major risk to Germany's own national budget. The Constitutional court is expected to opine on this latest hurdle today or tomorrow at the latest. However we doubt it. So what does the binary outcome ahead of Wednesday look like? Here are some Wall Street pundits opining. Curiously, while the market is also pricing perfection as the outcome to this event, there may be gray skies forming. Via Bloomberg:

Bank of America Merrill Lynch

  • Ruling poses more of a “binary risk” than other events this week, Ralf Preusser, head of European rates research, writes in client note published Sept. 7
  • Two risks that are not priced in: 1) court okays injunction request pending changes to law that introduces ESM into German legislation; 2) court sends case to European Court of Justice
  • Markets also not pricing in likely delays in countries activating ECB’s OMT support
  • Sees value in buying Nov. 144/146 bund call spreads for 26 cents, for pay-out ratio of 7.7x

Morgan Stanley

  • Still see 40% chance that court bans Germany from ratifying ESM treaty, Morgan Stanley’s Anselm Karitter says by phone, reiterating view outlined in Aug.  30 note by Elga Bartsch, chief European economist


  • Ruling may well contain “unpleasant surprises,” as fact court is taking so long to decide on such an injunction suggests it has some doubts, Holger Schmieding, chief economist, says in client note
  • Sees 20% risk that court will decide against allowing ESM to replace EFSF now; more likely that it will allow Germany to ratify ESM, while adding very restrictive interpretation to text
  • Sees only an outside risk that court could reject ratification of fiscal pact; court may clarify what it already hinted at strongly in EFSF ruling, that euro bonds are illegal

Daiwa Capital Markets Europe

  • While there’s risk of further postponement in judgment,  most observers expect court to allow ESM to go ahead, Chris Scicluna, head of economic research,  writes in client note
  • Degree to which court “emasculates” ESM by requiring additional conditionality on its operations will be key
  • If court were to postpone judgment for lengthy period, post-Draghi feel-good factor likely to dissipate swiftly

And, of course...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
GetZeeGold's picture



Don't get cute....just say no.


The Wizard of Oz's picture

What... is the air-speed velocity of an unladen swallow? 

holdbuysell's picture

What do you mean? Are you referring to a European or African swallow?

SemperFord's picture

European or African, ladies don't spit, they swallow!

bankruptcylawyer's picture

mid way through the film you can see someone tying a coconut to two birds and trying to see if they can fly. most people don't notice it, but i think this was one of the most funny subtle moments in the film. 

agent default's picture

Any decision they make will be  a politically influenced decision and nothing else. 

Coke and Hookers's picture

Correct. Anything else than a politically motivated ESM approval would be a major surprise. These guys are bitches of the globalists and banks like everybody else in the eurozone.

Sandmann's picture

Hey the US Supreme Court has no problem with Bernanke debasing the Us currency and giving $16 Trillion in guarantees to foreign banks so why should you expect German  lawyers to set up roadblocks

saturn's picture

I think KKK don't have the balls to say 9 and will sell Germans like cheap Schlampen to PFIIGS with a lot of crap talk around it so that it looks they put hard work into that decision of utmost futility. Keynesian empire taketh overth the world.

Aductor's picture

This is not about interpretation of (German) law. It's politics. So it will be a yes and markets will price in what they already have priced in. Capitalism really works...

ChubbNut's picture

Completely's going to get approved and it will take some other catalyst a month from now to put pressure on Europe again.

Sandmann's picture

Article 20 Paragraph 4 of the German Basic Law might see things differently - depends on your views on Machtergreifung

HelluvaEngineer's picture

Nah.  Draghi will just give them a shrubbery.

nokomarie's picture

Please, no more, we will find you a shrubbery!

francis_sawyer's picture

You must cut down the mightiest tree in the forest with... A HERRING!

Vincent Vega's picture

I think a delay is most likely. Nobody wants to make any real decision(s). Status quo must remain the status quo. Jawbone/can kick.

superbroker1's picture

Pfff. Bet this will get spun as bullish and we see 130 in Euro.

rubearish10's picture

New Advice <sarc>: don't bet against global central planning, harr.

larz's picture

Can I join this club?

stant's picture

if they say nen, they will have truly[ bravly fled and they bravly run]

francis_sawyer's picture

When danger reared it's ugly head ~ they bravely turned their tails & fled...

noses's picture

Well... Even the German WSJ is getting funny now: Commerzbank: EZB bringt Deutschland zum "Absturz" (--> "The ECB is going to crash Germany")


As if Germany needed any help with that.

helping_friendly_book's picture

Did the Upper House of the Bundestag ever vote on the bond issue? I know the lower house passed it but, haven't heard about the Upper House (German Senate) passing any measure allowing the ECB to issue bonds backed by Germany. 

Draghi is a douche and should be set on fire along with the Governers and Chairman of the FRBNY.

I am tired of this shell game. There is nothing under any of the shells.

Don't you people get it?

adr's picture

As long as nobody looks under the shells, they can kep shuffling them forever. All the players know there is nothing under them, but as long as nobody looks, there is hope they may be wrong.

Sandmann's picture

The Bundesrat is controlled by the SPD but it hardly merits a vote if the issue is in the Verfassungsgericht....anyway EU legislation is always a done-deal and never blocked

irie1029's picture

This site is great but I liken these times more to Dennis Moore and lupids.  

eigenvalue's picture

Come on. Be realistic. Does anybody really believe those German knobheads dare to place an injuction? Unlike Icelanders, the krauts have already lost their Germanic guts and become effeminate.

the not so mighty maximiza's picture

We will never know the verdict, right before thay say it the building will explode or catch fire.

Sandmann's picture

by a Merkel conservative, Peter Gauweiler


really ? He is not even in her CDU Party but in the affiliated CSU in Bavaria. He is hardly a fan of Merkel or the EU......but Merkel is simply Kohl's chosen successor to shaft his former deputy Wolfgang Schauble

Jake88's picture

It's just a flesh wound.

Lost Wages's picture

This old Drum 'n' Bass song "The Nine" is what I hear in my head when I picture the upcoming "Nein."

Ungaro's picture

The court's decision will be "Ja, aber..." (Yeah, but...). The markets will not hear a syllable after the first and will party on like it was 1999. S&P to 1,500 and beyond. What could go wrong?

nokomarie's picture

Alright, this sketch is getting too silly!

lolmao500's picture

Still see 40% chance that court bans Germany from ratifying ESM treaty

If only.

A Nanny Moose's picture

Tis only a flesh wound.