German parliamentarians set to vote to ban EU’s permanent debt mechanism

Reuters landed a great scoop out of Berlin on Tuesday, Feb. 22 , reporting that German parliamentarians were set to vote to ban the EU’s permanent debt mechanism (which will operate from 2013) from buying government bonds. The move is not binding on the government and it does not affect the current bailout fund, known as the EFSF, but shows just how constrained German Chancellor Angela Merkel is, casting real doubt on her ability to sanction an expanded EFSF – something the markets had fully expected to happen but are now beginning to doubt. Those doubts have begun to take their toll on Portuguese government bonds in particular since the start of the year.