BERLIN – European economies and investors dodged a bullet Wednesday when Germany’s high court ruled that the nation’s participation in bailing out its debt-ridden neighbors did not violate the constitution.
But the judges warned the German government not to assume it had a blank check for more financial rescues. Instead, any future bailouts need the approval of lawmakers charged with overseeing the budget. The requirement could slow down efforts to address Europe’s spiraling debt crisis.
Still, the court’s qualified support for emergency aid to flailing Eurozone countries came as a relief to nervous investors. The region’s major stock exchanges closed higher Wednesday after steep losses in recent days driven by alarm that the debt crisis was spinning out of control.
Had the high court gone against expectation and declared bailouts unlawful, the effect could well have been of a bomb going off in the marketplace, instantly raising the specter of default for Greece, Ireland and Portugal. As Europe’s biggest economy, Germany is on tap for the lion’s share of the emergency loans those three nations have been granted in order to keep paying their bills.
“For the market it could’ve created a lot more uncertainty. It could’ve been a horrible day,” said Azad Zangana, chief European economist with the financial management company Schroders.
The court ruling came in response to legal complaints by German academics and others over Germany’s involvement in last year’s rescue package for Greece and in the setup of a fund to help other debt-burdened Eurozone nations.