German Debt Brake Ruling Sparks Concerns for the Euro: Impact and Expectations

EUR: German debt brake causes some headaches

The uncertainty over Germany’s fiscal headroom, after last week’s Constitutional Court ruling, has yet to have any significant impact on the euro. On the one hand, it could limit Germany’s room for fiscal manoeuvre next year, but at the same time, it might deliver a softer interpretation of fiscal rules across the whole region. Indeed recently, the European Commission agreed that the Excessive Deficit Procedure will not be applied before European parliamentary elections next June. Locally, the focus will be on eurozone consumer confidence today, but the bigger driver for the euro should be tomorrow’s November flash PMIs – which are expected to be soft.