German Chancellor Angela Merkel and Harald Ringstorff, State Premier of Mecklenburg-Western Pomerania, present a new two-euro-coin displaying the Schwerin Castle, 02 February 2007 in Berlin.
German Chancellor Angela Merkel and Harald Ringstorff, State Premier of Mecklenburg-Western Pomerania, present a new two-euro-coin displaying the Schwerin Castle, 02 February 2007 in Berlin. - 
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Germany's top court has given the green light to Europe's new rescue fund. The court rejected claims that the fund was illegal under German law.

The German Constitutional Court's ruling means that Germany can ratify the permanent bailout fund, and that German taxpayers’ cash -- tens of billions of dollars worth -- can be pumped into the fund.

It's a pretty crucial decision, because the country is set to provide the largest single chunk of cash for the bailouts, and the ruling in favor of the fund this morning helped prevent chaos in financial markets.

So another critical part of the euro rescue plan is in place, and investors are liking the good news.

"It has been the focus of the tension for a month or two now," Stephen Lewis of Monument Securities points out. "And the fact that we've got through the event without mishap is going to be regarded as positive by investors."

Still, the he says the euro is not out of the woods yet. "It’s a small cloud that has lifted. There are plenty of others, of course. And there may be further constitutional objections to proceedings as they unfold in the months ahead."

Questions remain in Europe regarding Spain and whether it will accept a bailout. Elsewhere in Europe today, Dutch elections are set to be held; and the European Commission will reveal details of a planned euro zone-wide banking union that will ultimately involve a European deposit insurance scheme like the FDIC in the U.S. That’s likely to prove controversial, and perhaps provoke another challenge in Germany’s Constitutional Court.

 

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