European shares touched a 14-month high and the euro traded at its strongest level against the US dollar since May after the German Constitutional Court approved taxpayer participation in the European Union's permanent bailout fund.

The ruling, with conditions, paves the way for Germany's President to approve parliament's decision to provide around 27 percent of the Fund's €500 billion in lending capacity. The Court also judged that the European Central Bank's use of the fund, known as the European Stability Mechanism, would not violate German law.

Stocks rose on the announcement, even as investors had anticipated the details of the Court's verdict. Spanish bond yields dropped and Italy secured a €9bn sale of short-term bonds at one of its lowest interest rates of the year.