Germany's top court has rejected attempts to block creation of a new permanent bailout fund for the 17-nation euro currency union, giving the eurozone a new financial firewall to contain the continent's three-year debt crisis.

The Federal Constitutional Court ruled Wednesday that Germany can ratify the $644 billion European Stability Mechanism (ESM) as long as it meets certain conditions. Those include a $244 billion cap on Germany's contributions to the fund, which can only be increased with the approval of parliament.

German Chancellor Angela Merkel praised the decision as good for Germany and Europe.

“The emphasis on the rights of the parliament gives security to all: The parliament, but also the taxpayers, the citizens of this country and this security is important for the course we have taken and that is why I am saying this is a good day for Germany and a good day for Europe.''

Germany has Europe's largest economy and is a vital participant in the bailout fund. It was created to rescue eurozone nations crippled by debt, but some German lawmakers have grown wary of further assistance for the eurozone's debt-ridden countries.

European leaders are also pursuing other ways to address the ongoing financial crisis, including a proposal to have the European Central Bank oversee all 6,000 banks in the eurozone.

European Commission President Jose Manuel Barroso said Wednesday the bank supervision plan would help restore confidence in banks and break the “vicious link” between struggling financial institutions and heavily indebted governments.

The proposal must be approved by European Union members.

German officials have said trying to oversee all the eurozone banks would be too great a task and should be limited to only larger institutions. But Euro officials advocating the larger number say even small banks can create big problems.