German court backs euro fund
Germany's Constitutional Court gave a green light on Wednesday for the country to ratify the euro zone's new bailout fund and budget pact, but insisted the German Parliament have veto powers over any future increases in the size of the fund. A day of action: Europe in fluxbusiness Updated: Sep 13, 2012 01:55 IST
Germany's Constitutional Court gave a green light on Wednesday for the country to ratify the euro zone's new bailout fund and budget pact, but insisted the German Parliament have veto powers over any future increases in the size of the fund.
The eagerly awaited verdict boosted global stocks and the euro currency as investors breathed a sigh of relief that the euro zone's rescue fund for nations in crisis could soon take effect after months of delay.
European shares rose 0.7%, while the MSCI global index hit a 5-month high of 332 points.The euro eased off the accelerator slightly, dipping back to $1.2896, having hit a four-month high before the decision of $1.2906 versus the dollar.
Germany is the only country in the 17-nation euro zone that was yet to ratify the European Stability Mechanism (ESM), which is meant to erect a €700-billion firewall against the spread of the sovereign debt crisis.
"This is a good day for Germany and Europe," German Chancellor Angela Merkel said in a speech to Parliament.
The court has set two main conditions for the treaties to go ahead.
It said German liability in the rescue fund must be limited to €190 billion, the share set out in the current ESM treaty, and that any increase in that amount would require prior approval by the Bundestag lower house of Parliament.
It also ruled that a clause in the ESM treaty which seeks to keep decisions of the fund confidential "must not stand in the way of the comprehensive information", meaning both chambers would have the right to be consulted on the ESM's activities.