One Week After The Greek Vote, There's A Huge Event In Germany That Could Torpedo The Bailout


Photo: Wikimedia Commons

We mentioned yesterday how you have to pay attention to Jun 28, since Greece is going to be holding an austerity vote on that day, while the country goes on a gigantic strike. Should be wild.Well, one week later there’s another big event, in Germany.

Morgan Stanley explains:

The time for the troika to decide on the next tranche of the Greek rescue package is approaching. However, complicating matters is the German Constitutional Court’s formal hearing on July 5, which will judge if the first Greek package of May 2010 was in line with the German and European Constitution. The German government must prove that its actions did not violate the ‘non-bailout’ clause. It will have to argue that sovereign financial transfers will act only as ‘bridge funding,’ implicitly suggesting the private sector will take a bigger burden if it comes to restructuring peripheral debt. EUR debt investors will not like that, in our view. ¬†Although Morgan Stanley’s base case is that the Court will not rule the previous bailout as unconstitutional, the uncertainty surrounding the situation poses a key risk ahead.

No rest for the wicked!

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