Berlin - AFP
Germany's top court averted potential disaster for the eurozone Tuesday by clearing rescue packages for struggling economies, as lawmakers in three of Europe's major capitals voted on key finance reforms. Share prices soared across Europe in the wake of the ruling, with German stocks at one point rising by more than three percent. The markets were also keeping a close eye on events in the French, Italian and Spanish parliaments where governments are trying to force through austerity packages in the face of widespread opposition. In its ruling, the Constitutional Court in Karlsruhe, western Germany, said MPs should have a greater say in any future bailouts such as the package designed to pull Greece back from the brink. But while declaring government must "seek the approval of the parliament's budgetary committee before handing over guarantees," it rejected an argument by six eurosceptics which said the Greek bailout and setting-up of a wider bailout fund broke EU and German constitutional law. The ruling also appeared to prevent the creation of eurobonds with German participation, a measure that has been increasingly floated as a possible exit solution to the eurozone crisis. The judgement was widely welcomed by governments, aware that a new bout of uncertainty over the fate of Greece and other eurozone strugglers would deal a hammer blow to the single currency. In Brussels, a spokeswoman said the European Commission "has taken note with satisfaction of the constitutional court ruling on legality of the financial assistance for Greece and other measures". German Chancellor Angela Merkel claimed vindication from the ruling, albeit one which gives her less room for manoeuvre in the future. She hit out at critics who say Germany, the paymaster for the eurozone aid packages, has been too hesitant in the crisis and too strict in its demands for austerity from recipient countries. "Sweeping all the problems under the carpet and talking about solidarity won't bring us stability," she told parliament after the verdict, renewing a call for debt-mired states to implement structural reforms. "The problems of a single country can imperil the currency. That is why I say we need more Europe." The fate of Greece, which has had to implement draconian cuts to qualify for the bailouts, has prompted the Spanish government to seek approval for a constitutional reform capping future budget deficits. Opponents of the proposal again took to the streets in their thousands on Tuesday but senators were almost certain to endorse the reform later in the day. Under the constitutional change, Spain must stick to a long-term deficit cap except in times of natural disaster, recession, or extraordinary emergencies and even then only with approval of the lower house of parliament. An accompanying law to be enacted by next June would set the actual limit for the structural deficit at 0.4 percent of annual gross domestic product from 2020. The reform swept through the lower house last week as the ruling Socialists and main conservative opposition Popular Party overwhelmed calls by smaller parties for a referendum. In France, President Nicolas Sarkozy insisted he was determined to follow in Spain's footsteps and push through a balanced budget amendment "golden rule" despite reports he might drop the plan. "The president's determination on the golden rule is intact," an aide at the Elysee palace said. Sarkozy wants to send a signal to reassure rattled markets and ensure France keeps its triple-A sovereign debt rating. But the opposition Socialists say they will block the measure, which needs a three-fifths majority at a special joint congress of both houses of parliament -- something Sarkozy lacks. Sarkozy was certain to win backing Wednesday from the lower house for France's contribution to the Greek bailout and soon-to-be-implemented austerity measures. The Senate, the upper house, was likely to give its approval Thursday. Italy's Prime Minister Silvio Berlusconi faced his own parliamentary test as the Senate held a vote of confidence in the government over its hastily-modified austerity plan. Cabinet decided to call the vote of confidence to speed up adoption of the 45.5-billion-euro ($65.6-billion) package, citing "the seriousness of the international financial crisis". Berlusconi and his allies have a comfortable majority in the Senate. In a rejig of the plan Tuesday, the government announced plans to re-introduce a wealth tax, raise the VAT sales tax and introduce new pension reforms amidst a one-day general strike against the austerity package. The government also said it would adopt balanced budget rules on Thursday as part of efforts by the embattled eurozone member to regain the confidence of markets. The measures should help Italy bring its budget back into balance in 2013 instead of 2014.