06:34 AM EDT, 03/10/2025 (MT Newswires) -- The debt brake reform proposed by Germany's prospective government coalition would result in the largest fiscal expansion since reunification -- if it happens, noted Deutsche Bank.

Yet, it is far from a done deal, wrote the bank in a note to clients.

Accoridng to Deutsche Bank: the constitutional amendments need to clear two political hurdles before the new parliament constitutes itself on March 25: they need to be passed with two-thirds majorities in both Bundestag and Bundesrat.

These majorities aren't guaranteed, stated the bank. A number of other parties, including the Greens have political incentives to push the votes to the brink.

These political risks also translate into legal risk, pointed out Deutsche Bank. In an extreme case, the constitutional court could put a halt to a vote before the end of March, on the grounds of there not being sufficient time for deliberation. This would effectively scupper a debt brake reform in the outgoing parliament.

Overall, while the bank's base case remains for the reforms to pass, it's unlikely to be a smooth passage. In Deutsche Bank's view, both political uncertainty and market volatility could rise in the run-up to the hard deadline on March 24.

The considerable execution risk is one reason why the bank hasn't yet raised its forecasts in response to last week's paradigm shift. At this point, failure to pass the proposed debt brake reform wouldn't just severely limit the scope of a fiscal expansion in the next four years.

It would also undermine the next government's credibility from the start and lay bare the structural implications of the election: political fragmentation.