The German parliament’s budget committee approved a draft law on Wednesday on Germany’s contribution to the Greek financial package.
The vote was along party lines with PM Merkel’s coalition parties of Christian Democrats, their Bavarian Christian Social Union affiliates and the Free Democrats all backing the plan. The German parliamentis now on schedule to vote on the draft on Friday.
The Bundestag or lower house is the key entity voting.
The upper house or Bundesrag will rubber stamp it. So far, the coalition is holding together and will likely pass the Greek debt package on Friday. The opposition party has waffled on the deal as to whether to support it or not. They are focusing on the enforcement of the austerity plan before the funds are released.
Once passed, the bill will be signed into law and then presented to the Euro Zone meeting on Friday night. There is likely to be a constitutional challenge to the agreement, but this will not impede the flow of money to Greece.
There is a regional vote on Sunday in Germany’s most populous state, the North Rhine-Westphalia.
According to Reuters, “Under Germany's political system, the parties that form the governments in each of the country's 16 states are allocated a number of votes in the Bundesrat upper house of parliament. NRW has six votes -- the maximum any state enjoys -- out of 69 in total. The incumbent CDU/FDP coalition in NRW must retain power to ensure Merkel's government can rely on its support in the Bundesrat. If the CDU cannot form a coalition again with the FDP and is forced into coalition with another party, the new government would still have six votes but would likely decide to abstain in the Bundesrat on issues its parties cannot agree on.”
German polling shows voters don’t like Greek bailout package.
While a loss in NRW is not fatal, this will make it necessary for Merkel and the CDU to join into a coalition with another party.
Given that the ECB didn’t move today on rates, I believe they could be waiting for this vote to take action in the markets.
While Bubba’s Weber has put a stake in the ground saying no extraordinary action, I have to believe the ECB will move to ease credit shortly to stabilize the financial markets.
The longer they wait to act, the longer the healing process will take.
It’s simply astounding that they haven’t moved already.
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Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.