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FXstreet.com (Córdoba) - The German Constitutional Court is expected to rule Tuesday July 10 on the request for a temporary injection against the ESM and the fiscal pact on grounds that it transfers an unconstitutional amount of power to European institutions, says Marc Chandler, analyst at BBH.

"If the court rules in favor of the injunction, it would most likely delay the start of the ESM. That would leave the euro zone with the rump of the EFSF, which would have a bit less than 150 bln euro of guarantees after Spain's 100 bln euro bank backstop is provided", says Chandler. "Granting a temporary injection would itself raise uncertainty and in the current environment such uncertainty would likely be seen by investors as negative for risk taking in general and another weigh on the euro. A final ruling against the ESM could trigger a constitutional crisis in Germany".

Regarding its effect on the euro, "the risk seems asymmetrical", says BBH analyst. "If Constitutional Court rules in favor of the plaintiffs, the euro is likely to decline. However, if the court rules against the plaintiffs, the euro is unlikely to advance very much. The underlying debt problem remains and the existential crisis of how Europe is going to be governed remains open-ended".

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