A German constitutional court has rejected lawsuits aimed at blocking German participation in eurozone bailouts.
The court ruled by a "very tight" margin that Germany did not break the law when it agreed to fund a bailout for Greece - a process subsequently used for Ireland and Portugal.
However, it said the parliament must have a say in any decisions that lead to burdens for the German budget.
The complaint was taken to the Federal Constitutional Court, based in Karlsruhe, by a politician and a number of academics.
They argued that the Berlin government's bailout decisions violated treaties governing the euro and German law on democracy.
Confidence in the euro continues to be sapped by Italian wrangling over austerity, demonstrations in Spain, questions over Greece's ability to pay its debts and Finland's demand for financial guarantees before it gives anymore money to Athens.
There will be relief in European capitals at the decision of Germany's top court.
However, there will be concern over the demand that parliament has a greater say in decisions which weigh heavily on the German budget.
The main problem is that this will inevitably mean that decision making becomes slower and more complicated, if not fraught.
European stock markets rallied today following the decision.
Shares in Frankfurt closed over 4% higher this evening, while Paris markets were up 3.6% and London gained 3%. Shares in Dublin also closed 2.9% higher.
Bank guarantee
Elsewhere, Britain's former Chancellor of the Exchequer Alistair Darling has said the first he heard of Ireland's September 2008 bank guarantee was on the BBC.
In his memoirs, which are published today, the former Labour Chancellor says Ireland's decision to guarantee savings smacked of panic rather than a plan.
Mr Darling said he feared savers in British banks would shift their money to UK branches of Irish banks.
He says he told the then Minister for Finance, Brian Lenihan, by phone that morning that the British had been put in an impossible position and would take action if it became clear funds were flowing from British to Irish banks.
