The "conventional wisdom" on today's (Thursday, 9/29) vote is this:

1. Merkel's coalition is expected to vote for upping the bailout fund. It is a huge increase (to over 200 billion Euros) and high enough that the German voters' fury is going to start coming out in spades in the future.

2. But even with expectations that Merkel's coalition holds together, the reality is that in the lower house of the German parliament, Merkel's coalition controls 330 seats out of 620 total. If 19 votes from her coalition don't go for this package, the vote fails.

At that point, I'd expect the markets to sell off hard, and money to start flowing into US Treasury paper rapidly.


Two other things to keep in mind:

a) Even if Germany votes for this round of increasing the bailout, it still isn't enough. They just don't get it. They refuse to look at the stark numbers in front of them, the economics of what is happening in Greece and the maturity horizons of the Greek and Italian debt. This problem will be back again.... very soon.

b) The further Germany goes down this road, the greater the threat to their own AAA status. At some point, S&P will downgrade them, and then the German voters' fury will really be set in stone.