In Boost for Merkel, German Court Backs Euro Rescue Fund

This is interesting.

At the New York Times, "In Victory for Merkel, German Court Ruling Favors European Bailout Fund":

KARLSRUHE, Germany — The Federal Constitutional Court in Germany gave Chancellor Angela Merkel a significant victory on Wednesday in her bid to master the debt crisis that has buffeted the Continent for years and endangered its common currency, granting approval to one of the main pillars of her strategy.

With the ruling, the 17 European Union countries that use the euro will be able to move ahead with the establishment of the European Stability Mechanism, something like a Continental version of the International Monetary Fund. The mechanism will handle bailouts and work in tandem with the European Central Bank to buy the bonds of countries like Italy and Spain that are straining under high interest rates.

The court ruled that Germany could proceed with its contribution to the mechanism, but it set certain conditions, including a requirement for parliamentary approval of any increase in the agreed-upon German contribution of 190 billion euros, or about $240 billion.

The fund, with $644 billion, is intended to buoy struggling countries and help protect the common currency, an impossible mission without Germany, which has the European Union’s largest economy. Although the ruling is unlikely to still Europe’s economic crisis entirely, a rejection could have unleashed new waves of instability and thrown the fitful march toward European integration into question.

“Once again, Germany today sends a strong signal out to Europe and the world beyond,” Ms. Merkel told Parliament. “Germany is decisively true to its responsibility in Europe as the largest economy and a reliable partner.”

For Ms. Merkel, rejection by the court would have been a severe political blow. Her coalition has been weak and fragmented at home. Her leadership in Europe has helped her clamber above the domestic political fray, even if many are leery of the growing financial commitments.

The court ruling cheered investors, with the Stoxx 50 index of euro zone stocks rising 1.1 percent in morning trading to its highest point since March. The euro rose to nearly $1.29, its highest since May. On Wall Street, the major market indexes were up at the close of the trading day.

More at the link.