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UPDATE 1-German constitutional court puts ratification of EU recovery fund on hold

·2 min read

(Adds details, context)

By Michael Nienaber

BERLIN, March 26 (Reuters) - Germany's constitutional court said on Friday that the president may not sign off legislation ratifying the European Union's Recovery Fund as long as it was looking into an emergency appeal against the debt-financed investment plan.

The statement of Germany's highest court, which came after both chambers of parliament ratified legislation this week, did not give a time frame when a legal decision could be expected.

Opponents of the EU's recovery plan, including the far-right Alternative for Germany (AfD) party and a group called Citizens' Will Alliance, argue that the plan violates European treaties by opening the door to joint borrowing by member states.

Finance Minister Olaf Scholz, a key backer of the project, has said the European Recovery Fund marks the first step towards a "fiscal union" in which member states will transfer more powers to Brussels away from national capitals.

Five plaintiffs filed a complaint with Germany's top court on Friday against the EU fund, a spokesman for the court said earlier. "An emergency appeal and constitutional complaint have been filed today," the spokesman added.

There is no time limit for the court to decide on the complaint, but it could take up to three months for the court to decide on the emergency appeal.

This means German ratification could be delayed until June. This would still be in time for the European Commission's overall plan to take on joint debt and pay out first tranches of the recovery money in the summer.

The Bundestag, the lower house of parliament, passed the German ratification law on Thursday with an unusually large majority of nearly 75%. The Bundesrat, the upper house, followed suit on Friday. It must be signed off by President Frank-Walter Steinmeier before it can come into effect.

During the debate in parliament, Chancellor Angela Merkel said the EU plan would create an important tool to overcome the COVID-19 pandemic, but she insisted that it must remain a one-off event which could not be repeated.

The European Commission will be allowed to raise up to 750 billion euros on capital markets and pass on the money to member states worst hit by the pandemic through payments linked to jointly agreed reform and investment plans, partly as grants and partly as loans. (Reporting by Michael Nienaber; editing by Kirsti Knolle and Giles Elgood)