German Court Ruling Could Ruin The ECB's Plan

The Euro approached a 4-month high against the US Dollar on Tuesday on the back of expectations that the German constitutional court will support the Euro Zone bailout fund and speculation that the US Federal Reserve will ease monetary policy.
However Germany's constitutional court could shock most investors by rejecting the European Stability Mechanism in it's ruling later today.
A negative decision would threaten the European Central Bank's plans to lower borrowing costs of debt troubled nations like Spain and Italy, the same plans that gave the Euro a boost last week.
Germany is the only European country that has as yet not ratified the European Stability Mechanism (ESM). The ESM is a 500 billion Euro ($643 billion) fund that extends loans to Euro zone members and may purchase their bonds to lower borrowing costs.
Today's court ruling is important, as should the court rule that Germany can not join, then the mechanism will not be created and other bailout measures could be thrown into doubt.
I think it's likely that the Court will rule that the ESM is legal, however it may impose conditions on its future use.
Dutch voters head to the polls today to elect a new parliament. Polls show that the opposition Labour Party would take 34 seats, while Prime Minister Mark Rutte's Liberal Party should take 35 seats.
Should the Liberal party take the majority seats, as expected, then we could see a return of the grand coalition that governed for eight years until 2002.
This would make it unlikely that there will be any shift in direction in Dutch backing for German Chancellor Angela Merkel's "austerity first" approach which she has towards the Euro area financial crisis. In other words, Netherlands would then support further bail outs for peripheral Euro zone governments.