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UPDATE 2-German top court allows approval of EU recovery fund

* Germany can sign EU recovery fund into law

* Constitutional complaint still pending

* Von der Leyen welcomes top court’s decision (Adds detail, reactions, background)

BERLIN, April 21 (Reuters) - Germany’s constitutional court declined on Wednesday to block the European Union’s COVID-19 recovery fund, removing one of the last major hurdles before the bloc can launch its 750 billion euro ($900 billion) debt-financed fund.

Each EU member state must ratify the fund. Opponents of the fund in Germany have argued that allowing the European Commission to borrow funds would exceed the EU’s powers.

Germans have long been politically sceptical of plans for joint European debt, but Chancellor Angela Merkel backed the recovery fund last year as a one-off measure to tackle the economic damage from the COVID-19 pandemic.

Opponents had sought an emergency court ruling to halt the fund, pending a full decision in their legal case. But the court declined to grant it, saying a cursory review did not reveal a high probability that the borrowing violates Germany’s constitution.

EU Commission President Ursula von der Leyen welcomed the decision: “The EU stays on track with its economic recovery, following this unprecedented pandemic,” she said on Twitter.

The court did not give an indication on when it would rule on the full complaint against the fund. But it said there would be more potential harm from blocking the fund pending a full ruling than from allowing it to go ahead in the meantime.

The Citizens’ Will Alliance, which filed the complaint, said it was disappointing that Germany could now ratify the legislation “without the legality and constitutionality having been thoroughly examined and clarified beforehand”.

The faction of the far-right Alternative for Germany (AfD) party at the Bavarian parliament said the top court’s decision highlighted the need for Germany to leave the EU.

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

$1 = 0.8331 euros Reporting by Kirsti Knolle, Maria Sheahan Editing by Kim Coghill and Peter Graff