German court rejects euro bailout legal challenge

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Germany's Constitutional Court has rejected a series of lawsuits aimed at blocking Germany's participation in bailout packages for Greece and other eurozone countries.

But the court has also ruled parliament must have a bigger say in future rescue packages.

The country's highest court in Karlsruhe said the German government must seek the approval of parliament's budget committee before granting aid like the €110 billion rescue package given to Greece.  The new requirement could slow down even further Europe's response to the debt crisis, however both the DAX 30 in Germany and France's CAC were lifted on the announcement.

Before the much anticipated announcement it had been thought that if the German court decided to toughen its stance on bailouts, other countries may follow suit.

'Key will be whether the court forces the Bundestag to have full plenary sessions to vote on every activation of the EFSF or whether it would accept that such decision was delegated to the budget committee,' Royal Bank of Scotland Securities' Kieran Davies said.

Barclays Capital, meanwhile, said that even though the court had been willing to consider the two complaints about the bailout, received back in July last year, it believed that previous measures would not be reversed.

'The president of the court, Andreas Voßkuhle, suggested what the final verdict might look like. He suggested: any further rescue measure would have to be temporary; the Bundestag might have to approve every single tranche of financial support; and at the EU level, unanimity would have to prevail when it comes to providing financial assistance.'

'Voßkuhle even put forward the idea of setting a definite "limit" in terms of a maximum guarantee amount. The court [could] also outline limits for any further financial assistance and demand parliament have a say in such affairs. That said, the signals sent by the court's latest hearing suggest to us that the measures taken so far will not be undone,' Barclays'  Nick Verdi explained. 

Following the announcement, Germany's DAX 30 rose 2.73% to 5,335, cheering the news after closing at 5,193 on Tuesday, as the verdict represents a significant victory for Angela Merkel's government.

France's CAC 40 climbed 2.95% to 3,053.