And in other (less surprising) news

The Karlsruhe Court has refused to block the ESM treaty and, as the Washington Post reports, inevitably the markets "breathed a sigh of relief" and "rallied". The article does not add the words "for the time being" but that is understood.

The Financial Times also reports the result, adding:

The conditions imposed by the court appeared less onerous than some of the fund’s supporters had feared.

It ruled that the ceiling of €190bn in German financial guarantees imposed when parliament approved the rescue fund could only be increased with the assent of lawmakers. There must be no unlimited liability for Germany, the ESM’s biggest backer, the justices decided.

The judgment was greeted with immediate relief by members of the German parliament. Frank-Walter Steinmeier, leader of the opposition Social Democrats, expressed satisfaction that the Bundestag decisions had been confirmed.

“The ESM can finally start work,” he said.

What happens when that money runs out and the German economy suffers some more?

Reuters adds that "the euro rose to a four-month high against the dollar" because of the Court decision. The train wreck continues.

More detailed analysis

Der Spiegel has an article that analyzes in greater detail the Karlsruhe decision. There is still no mention of those pesky Articles 122 and 125. Did they not rule on that? Also, it is hard to avoid the conclusion that this ruling may give the German parliament more power in theory but in practice it will be possible to circumvent it, thus infuriating yet more people, which is something politicians are rather good at doing.

Another article describes the scene at Karlsruhe.

Shortly thereafter, the fun came to a halt. Germany's highest judicial authority, the Federal Constitutional Court, issued its anxiously awaited ruling on the euro rescue package on Wednesday morning. Although their cases were rejected, the decision still represented a partial victory for Nölling and the remaining plaintiffs. The justices declared that the billions in guarantees for Greece and other highly indebted euro-zone countries were fundamentally constitutional, but they also demanded a greater say and participation in future bailouts by Germany's parliament, the Bundestag.

This, as many swiftly realized, might well mean that there will be preliminary agreements between the Bundestag and the government in order not to cause any trouble. However, there will always be the possibility that those agreements will not work and that possibility will become stronger with every new bail-out.

The Economist is pleased with the result - the euro is safe for the time being, more or less - but thinks Merkel loses in the court of public opinion.

As expected ...

... the German Constitutional Court in Karlsruhe denied that the existing bail-outs are unconstitutional but decreed that in future the Bundestag budgetary committee must give a prior agreement "before any further German financial guarantees for loans to its 16 partners in the eurozone". The decision does not seem to have made anyone particularly happy, though as the Financial Times, a fervent supporter of the continuation of the eurozone, says

The judgment amounts to an important victory for the German government, although it could complicate negotiations over future crisis measures by reinforcing the parliamentary control of the Bundestag.

It lifts a cloud over the €110bn rescue package agreed last year for Greece, and the €440bn European Financial Stability Facility (EFSF) used to provide further financial assistance for both Ireland and Portugal. It should also clear the way for German parliamentary approval for further crisis measures to extend the powers of the EFSF.

What could be worse than reinforcing parliamentary control over an unaccountable procedure that will be the EFSF?

So the relief that the reforms to the EFSF, i.e. more powers to control financial measures and transfer of funds, will probably be approved of is tempered by the thought, as expressed by Carsten Brzeski, senior economist at ING Belgium,

"A bigger say for German parliament in future bailouts could easily find copycats in other eurozone countries, undermining the clout of the beefed-up EFSF,” as well as the permanent European Stability Mechanism to be established from 2014.

Meanwhile, Chancellor Merkel, whose joy over this decision must be severely qualified by the thought of her own government possibly not supporting her over those reforms, said in a speech to the Bundestag that serious reforms of the eurozone were needed.

"I'm convinced that this crisis, if a great crisis of the western world is to be avoided, cannot be fought with a 'carry on' attitude. We need a fundamental rethink," Merkel said.

"We must make it very clear to people that the current problem, namely of excessive debt built up over decades, cannot be solved in one blow, with things like euro bonds or debt restructurings that will suddenly make everything okay. No, this will be a long, hard path, but one that is right for the future of Europe."

Quite so, Chancellor.

While her opponents, the SPD cannot claim any credit, being in government when Greece was allowed into the eurozone, the handling of the crisis is ever more unpopular in Germany and that includes Chancellor Merkel's own party and supporters.

Merkel has also come under fire from some members of her own party for going too far in rescuing countries like Greece, Ireland and Portugal.

Horst Seehofer, the head of her Bavarian sister party, told the Bild newspaper on Wednesday morning that a Greek exit from the euro zone could not be ruled out.

Some of Merkel's traditional allies are threatening to oppose new powers for the euro zone's rescue fund in a parliamentary vote later this month, in what is developing into the biggest threat to her leadership since she first took power in 2005.

Meanwhile, the coverage of the Karlsruhe decision is divided between those who think this has given the Bundestag more powers (or, perhaps, returned powers) and those who think that this has really salvaged the whole operation temporarily as nobody really dares to think too far ahead. Daniel Hannan seems to be the only one who raises another aspect of the case, the EU's blatant violation of its own rules, to wit, Article 125, which specifically states

1. The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project. A Member State shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of another Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.

Well, we all know how they got round that: by using or, rather, misusing Article 122:

1. Without prejudice to any other procedures provided for in the Treaties, the Council, on a proposal from the Commission, may decide, in a spirit of solidarity between Member States, upon the measures appropriate to the economic situation, in particular if severe difficulties arise in the supply of certain products, notably in the area of energy.

2. Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, on a proposal from the Commission, may grant, under certain conditions, Union financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision taken.

On with the motley!