Instant View 2: Top court gives Germany green light on ESM but sets conditions

BERLIN (Reuters) - Germany's Constitutional Court said on Wednesday the country can ratify the euro zone's new rescue fund and budget pact as long it can guarantee there will be no increase in German financial exposure to the bailout fund without parliament's approval.

Ruling that an injunction against the European Stability Mechanism (ESM) and fiscal compact was largely unfounded, the court said one condition for allowing ratification was that any increase in German liability beyond 190 billion euros must first be approved by the Bundestag lower house of parliament.

It also said ESM decisions must be submitted to both houses of parliament for approval, rejecting a confidentiality clause in the treaty.

MARKET REACTION

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ANALYSTS' COMMENTS

ION MARC-VALAHU, FUND MANAGER, CLAIRINVEST, GENEVA:

"The conditionality is a bit more on the negative side. The maximum liability is a bit disappointing. But the risk premia have been compressed over the last two months and equities have benefited and they should continue to benefit from this overall positive outcome."

DAVID THEBAULT, HEAD OF QUANTITATIVE SALES TRADING, AT GLOBAL EQUITIES, PARIS:

"It's a positive outcome, with acceptable conditions, and the market should react positively to it. The euro zone has got over another hurdle, and slowly but surely, the region is getting more stable, less risky.

"The only big issue left now is Spain, but the mechanisms to deal with the country's problems are taking shape."

KEVIN LILLEY, EUROPEAN EQUITIES FUND MANAGER, OLD MUTUAL ASSET MANAGEMENT:

"The market was expecting it to be ratified but with some conditionality, which seems to be the case. The conditionality that I've seen so far doesn't come as a great surprise. ? It hasn't shocked the market in a negative sense and therefore it allows the market to move forward."

(Reporting by Berlin and London newsrooms)

Source: http://news.yahoo.com/instant-view-2-top-court-gives-germany-green-083524692.html

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