The constitutional court ruling that the German government's use of off-budget funds is unlawful is another headache for the ruling coalition in Berlin. However, we doubt that it will result in as much fiscal tightening as first meets the eye. The funds affected were set to be spent over several years and politicians are likely to find some way around the ruling. Next week we think the Riksbank will hike rates by 25bp to 4.25% and expect business surveys for November to point to a continued weakness in the euro-zone economy.
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