KARLSRUHE, Germany -- Germany's high court
on Wednesday rejected calls to block the Europe's permanent rescue fund,
paving the way in a much-anticipated ruling for its ratification by the
country's president.
Investors breathed a
sigh of relief that Germany's highest court was not putting up a
roadblock in a central part of Europe's efforts to contain its near
three year debt crisis. Stocks across Europe rallied strongly, the euro
spiked to a four-month high of $1.2897 and the borrowing rates of
troubled economies, such as Spain and Italy, eased further too.
Opponents
had challenged Germany's ratification of the European Stability
Mechanism -- a new, permanent €500 billion ($638.8 billion) bailout fund
for the 17 countries that use the euro -- arguing that it violated the
country's constitution. They had sought an injunction preventing the
country's president from signing the legislation into law.
Germany's
ratification of the ESM is key, because the fund cannot work without
the country's participation. Germany, as Europe's biggest economy, is
the number one contributor the fund.
The
taxpayer-backed fund is crucial to the eurozone's debt crisis resolution
efforts because it can loan money to governments that can't borrow
otherwise, and markets had been nervously awaiting the ruling.
Federal
Constitutional Court Chief Justice Andreas Vosskuhle said the case
posed "special challenges" -- not just because of the political
significance of the ESM, but because the financial and political
consequences of a possible delay were "almost impossible to estimate
reliably."
But, he said, the court's "examination showed that the law with high probability does not violate the constitution."
Still,
he said Germany must get legal guarantees before ratification that the
provisions of the ESM can't be interpreted in such a way that Germany's
financial liability could be increased without the approval of Berlin.
Germany
must also ensure that provisions in the ESM treaty demanding
"professional secrecy" from fund employees don't stand in the way of the
German Parliament being informed in full about fund decisions.
Germany
is liable for about 27 percent -- about €190 billion -- to the overall
European bailout scheme of €700 billion, which includes the ESM and
remaining money from the current temporary fund, the European Financial
Stability Facility.
It was not immediately
clear when the President Joachim Gauck would be able to sign the
measure, which was already approved by Parliament.
Chancellor Angela Merkel was due to address lawmakers later Wednesday.
Associated Press