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The nine judges of the Court ruled unanimously that Yingluck, 46, had “violated the constitution.
A government emergency meeting nominated deputy prime minister of economy, Niwattumrong Boonsongpaisan to be acting prime minister of an interim government.
“The caretaker government’s responsibility now is to organise an election as soon as possible,” Niwatthamrong told Reuters.
“I hope the political situation will not heat up after this,” he added.
But in a televised speech, Yingluck maintained her innocence.
“Throughout my time as prime minister I have given my all to my work for the benefit of my countrymen … I have never committed any unlawful acts as I have been accused of doing,” she said.
Yingluck’s supporters, who call themselves the Red Shirts, have vowed to hold demonstrations in the capital Bangkok on Saturday.
There are fears that clashes between her supporters and those who have sought to remove her from power could be renewed in the wake of the Court’s decision.
Protests began in November against a bid by the government to officially pardon former Prime Minister Thaksin Shinawatra, Yingluck’s brother, a former business magnate currently in exile in Dubai.
Thaksin was ousted in a military coup in 2006 and accused of corruption and abuse of power. Yingluck, who belongs to the political movement founded by her brother, is also being investigated for corruption, as voices calling for her resignation grow louder.
On February 20, the Thai National Anti-Corruption Committee (NACC) announced they would charge Yingluck with corruption for her role in a controversial rice subsidy scheme that critics say has harmed the country’s rice exports.
The policy had the government buying crops from farmers at prices up to 50 per cent higher than world prices over the last two years. The NACC said it leaves much room for financial corruption.
Yingluck has denied the accusations.