Tuesday, February 28, 2012

Euro zone bailouts face German legal hurdle

(Reuters) - Chancellor Angela Merkel's room for maneuver on future euro zone bailouts, in doubt after a revolt by coalition lawmakers, shrank further on Tuesday when Germany's top court raised a hurdle to swift action in financial rescues.

The German constitutional court ruled that parliament may not delegate most decisions on disbursing bailout funds to a special committee meeting in secret, as Merkel had planned after a previous ruling bolstered lawmakers' oversight powers.

But financial markets, buoyed by the prospect of another bumper injection of cheap, three-year European Central Bank funds to banks on Wednesday, shrugged off the setbacks for Europe's main paymaster.

Italy's 10-year borrowing costs fell to the lowest since last August at an auction in another sign that the ECB's three-year cash bonanza, combined with Rome's fiscal and economic reforms, have steadied bond markets and eased the euro zone's debt crisis.

The court ruling came a day after Merkel won parliamentary backing for a second aid program for debt-stricken Greece without securing an absolute majority of her own centre-right deputies, in a sign of growing public hostility to bailouts. Read More