By Madeline Chambers
BERLIN (Reuters) - Germany's top court ruled on Wednesday that the country's election law is unconstitutional, leaving Europe's biggest economy with no valid rules on how to distribute seats in the Bundestag lower house just over a year before the next vote.
The Karlsruhe-based Constitutional Court upheld a case brought by the opposition Social Democrats (SPD), the Greens and more than over 3,000 citizens against the law, which was altered by Chancellor Angela Merkel's center-right coalition last year.
Germany's complex system, which can end up creating extra or "overhang" parliamentary seats that benefit the bigger parties, breaches citizens' rights to take part in direct, free and equal elections as enshrined in the constitution, the court said.
Merkel's government, preoccupied with trying to stem the euro zone debt crisis, now has to come up with a new law by autumn 2013, when the next federal election is due.
A spokesman said the government respected the court's decision.
"Clarity has been brought to bear on a complex matter of German electoral law... This ruling must now be carefully, but quickly looked at," said deputy government spokesman Georg Streiter at a regular news conference.
Officials said they expected to have a law in effect by the next election and refused to speculate on what would happen if that were not the case.
Although the ruling is an embarrassment for Merkel, it is probable that all German parties will now agree on a new draft law. This might dilute the positive effect this quirk in the system has had on the bigger parties, especially Merkel's conservatives, but it unlikely to swing election outcomes.
In Germany, each voter can cast two ballots - one for a specific candidate in his or her constituency and the second for a particular party.
If a party wins more direct seats in a constituency than it would theoretically get according to the percentage of second votes, the Bundestag creates extra, or "overhang" seats.
This system has over the years benefited the bigger parties, and most of all Merkel's conservative Christian Democrats (CDU). In 2009, the CDU and its sister party, the Christian Social Union (CSU) won a total of 24 overhang seats.
Wednesday's ruling, which follows a judgment in 2008 when the court said the system could give an advantage to bigger parties, makes clear last year's changes left a system that was still at odds with the constitution.
Whereas usually on such matters a cross-party consensus is reached, Merkel's government decided to go ahead with the changes despite objections from opposition parties.
"The (court) has decided.. that the new method of distributing lawmakers' seats in the German lower house breaches the basic principles of equal, direct elections as well as that of offering equal opportunities to the parties," the court wrote.
Opposition parties made the most of what they described as a major victory.
"The coalition has paid the price for abusing the election law as an instrument of power," said Thomas Oppermann, a senior Social Democrat. "All citizens must be able to depend on their vote being just as valuable as someone else's."
Bundestag President Norbert Lammert, a member of Merkel's CDU, called on all parties to put their differences behind them and agree on a new law.
"(The ruling) gives us reason to take a self-critical look at the legislative process," said Lammert, adding that it was important to avoid giving voters the impression that individual parties or candidates would be favored.
(Reporting By Madeline Chambers. Editing by Jeremy Gaunt.)