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Markets cheer as German court OKs euro bailout fund

By Fu Jing in Brussels and Wei Tian in Beijing (China Daily) Updated: 2012-09-13 02:19

The eurozone has taken a significant step to address its chronic sovereign debt crisis, with German's conditional approval Wednesday of a 700 billion euro ($901.8 billion) firewall against the debt crisis.

European experts say establishing the European Stability Mechanism can solidify Beijing's confidence in the European Union at their Sept 20 summit in Brussels. Beijing has repeatedly expressed its concerns over the EU's progress in dealing with the crisis and its impact on the global economy.

Observers in China say Beijing will not get involved much in the ESM because it addresses the European debt crisis mainly through the International Monetary Fund.

They also say Beijing will offer "conditional" help for Brussels when talking about fighting the crisis.

The German Constitutional Court gave a green light Wednesday to the country to ratify the eurozone's new bailout fund and budget pact, but insisted the German Parliament have veto power over any future increases in the size of the fund, according to Reuters .

The eagerly awaited verdict boosted global stocks and the euro as investors breathed a sigh of relief over the fact that the eurozone's rescue fund for nations in crisis will soon take effect after months of delay, Reuters reported.

Germany is the only country in the 17-nation eurozone that has yet to ratify the ESM, which would erect a 700 billion-euro firewall against the spread of the 3-year-old sovereign-debt crisis.

"This is a good day for Germany and a good day for Europe," German Chancellor Angela Merkel was quoted by Reuters as saying.

"The ruling is not only positive for Europeans, but also for China," said Peter Guilford, executive chairman of GPlus Europe, adding that the approval of ESM is good for China in both strategic and political terms.

"It is certainly in China's direct interest to have a stable European market and European currency," Guilford said.

Jonathan Holslag, research fellow of Brussels-based Brussels Institute of Contemporary China Studies, still worries about the future of the eurozone, though he said Wednesday was "a good day for Europe."

Holslag said the eurozone's heavy reliance on external involvement could be a potential risk to this bloc.

Feng Zhongping, director of the Institute of European Studies at China Institutes of Contemporary International Relations, said the conditional approval by Germany of the ESM will help stabilize the volatility in the eurozone.

"But it will not have much effect on China's role in solving the eurozone crisis, as China's participation in rescuing the eurozone is mainly via the IMF, and the mechanism was only for eurozone countries," he said.

The euro on Wednesday finished above $1.29 for the first time in four months.

The borrowing rates of countries at the frontline of Europe's debt crisis eased further Wednesday, with the yield on Spain's 10-year bonds down 0.07 percentage point to 5.60 percent, and Italy's falling 0.03 percentage points to 4.98 percent.

Liu Jia contributed to the story in Brussels

Contact the writers at fujing@chinadaily.com.cn

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