German MPs to pass crisis tools but hurdles remain
* Merkel to reach 2/3 majority with opposition help
* Bailout scheme can't begin without German ratification
* Constitutional court will delay final German approval
By Stephen Brown and Noah Barkin
BERLIN, June 29 (Reuters) - Germany's parliament will finally approve on Friday the euro zone's permanent bailout mechanism and new European budget rules drawn up by Chancellor Angela Merkel, but ratification of these tools for combating the debt crisis still faces legal hurdles.
Merkel will hurry back from a tense European Union summit for voting in the Bundestag (lower house) and Bundesrat (upper house) beginning at 5 p.m. (1500 GMT). A deal with the opposition will ensure she gets the two-thirds majority needed.
The euro zone's biggest member is taking its ratification of the European Stability Mechanism (ESM) and the "fiscal pact" for budget discipline to the wire, voting on the last day possible for the original July 1 deadline for the ESM.
The bailout scheme cannot come into effect without German backing as it needs approval by countries making up 90 percent of its capital base. This has now been put back to July 9 with only a handful of the euro zone's 17 countries having complied.
But Germany risks missing the second deadline too, despite the urgings of policymakers such as European Central Bank board member Joerg Asmussen to get the crisis-fighting tools ready.
In the absence of "textbook" solutions, the German ECB policymaker said, Europe had to grab the best tools available. "Concretely, the national ratification processes of the ESM and fiscal pact must be finalised quickly," he told a German political website.
Getting this far took months of horse-trading in Berlin, with Merkel agreeing to focus more on growth and job-creation while the Social Democrats (SPD) and Greens dropped calls for joint euro bonds, which Merkel says won't exist in her lifetime.
But parliament is not the final hurdle. Ratification also requires approval by the all-powerful Constitutional Court - which has slapped the government's wrist for taking short cuts on European policy - and President Joachim Gauck's signature.
This may take weeks rather than days. In a series of rulings since 2009, the court has expressed its reservations about the steady transfer of power to Brussels, and affirmed the right of Germany's parliament to vet decisions taken at European level.
ON THE BRINK
Tension between Germany's democratic principles and a push to give Brussels more power to intervene in national policy appears to be approaching breaking point.
The court in Karlsruhe may clear the ESM and fiscal pact but demand further steps "to ensure that the upper and lower houses of parliament are sufficiently involved", said Daniel Thym, law professor at the University of Constance.
But there is a chance the court could link approval of these new mechanisms to a change in the constitution - which would require Germany's first national referendum in the post-war era.
At the very least, experts believe the court could warn that its approval of any future integration steps, beyond the ESM and fiscal compact, would require constitutional change.
Calling a referendum would be a risky ploy in Germany, where Adolf Hitler gave plebiscites a bad name in the 1930s by using them to amass power as Fuehrer, stuff the Reichstag with Nazis and legitimise occupying the Rhineland and annexing Austria.
But Europhiles such as Finance Minister Wolfgang Schaeuble say the changes being contemplated - on the road to "political and fiscal union" - may need a referendum sooner than many think. His predecessor Peer Steinbrueck expects one within two years.
"Just a few months ago, few people thought we could be on the brink of a referendum on changing the German constitution," Heinrich August Winkler, one of Germany's most prominent historians, told Reuters. "Now there is a chance that the Constitutional Court could demand just that, possibly even linking it to approval of the ESM and Fiscal Compact."
Winkler said if that occurs it could become a central issue in the 2013 elections when Merkel should seek a third term, with pro-European parties attempting to call the Eurosceptics' bluff by making it a "yes" or "no" vote on Europe and the euro.
That debate could split Merkel's centre-right coalition. Her Christian Democrats (CDU) and their Free Democrat (FDP) allies contain loud but so far manageable Eurosceptic elements, while the CSU from Bavaria opposes transferring powers to Brussels.
"The pro-European parties will have strong arguments. I think they could win over a majority of Germans. But there would be an intense debate," said Winkler. (Additional reporting by Diana Niedernhoefer in Karlsruhe; Writing by Stephen Brown; editing by David Stamp)
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