PARIS (Reuters) – A widening reality gap between Germany and the weaker members of the euro zone over how to solve the currency area’s sovereign debt crisis bodes ill for decisions eagerly awaited by financial markets next month.
Berlin’s centre-right coalition parties and the German central bank have taken hardline positions this week that could tie Chancellor Angela Merkel’s hands against any strengthening of the euro zone rescue fund, dashing investors’ expectations.
“Market participants are beginning to smell that there is huge room for disappointment on the outcome of the Euro summit … as there will be several regional elections in Germany,” a London bond trader said, speaking on condition of anonymity.
A parliamentary resolution drafted by the three German governing parties would sweep most of the potential solutions under discussion in the European Union off the table.
Although not legally binding, it will put Merkel in a tight negotiating “corset,” as Christian Democratic lawmaker Klaus-Peter Willsch put it.