Germany defeats bid to block its help for eurozone strugglers

Germany's constitutional court rejected a series of lawsuits brought by six eurosceptics last year, which claimed the country's contribution to bailout packages for Greece, Portugal and Ireland were illegal.

Chancellor Angela Merkel said the ruling had backed her actions in propping up weaker nations, but the court also warned the Germany parliament must have a bigger say in future rescues.

European leaders established a €440 billion (£386 billion) bailout pot, the European Financial Stability Facility, last year although as Europe's biggest economy, Germany foots more than a quarter of the bill for each bailout.

Merkel has come under intense political pressure at home as the bailouts are deeply unpopular. This is likely to increase since eurozone nations are voting on expanded powers for the EFSF, including the ability to buy up the debt of the region's strugglers.

ING Bank economist Carsten Brzeski said: "Today's ruling should bring some relief to financial markets as a total chaos scenario has been avoided but it should not lead to euphoria. A bigger say for the German parliament in future bailouts could easily find copycats in other eurozone countries undermining the clout of the beefed-up EFSF."

The ruling helped lift the euro nearly half a cent to $1.4039 in a more positive session for stock markets, which saw London's FTSE 100 add 99.32 points to 5256.16. Italy and Spain's cost of borrowing for 10 years fell.

Citigroup economist Giada Giani added: "The key point is that it removes an element of uncertainty which has been out there since the original bailout of Greece nearly 18 months ago.

"It strengthens Merkel's position and at the margins it is a positive thing. But it is just an drop in the ocean compared with the eurozone's other problems."