In its decision, the European Union Court of Justice agreed with Advocate General Christine Stix-Hackl from Austria, who argued that tax vouchers given in the 1990s to German investors in German, as opposed to foreign, companies were unfair.

The case, which had dragged on for years, was brought by a German family who claimed they had been disadvantaged for buying stocks in Danish and Dutch companies. German tax laws were changed in 2000.

But with the court's ruling, German investors in foreign firms can apply for refunds of up to five billion euros ($6.5 billion). The federal government in Berlin would be responsible for coming up with at least half of the money.

That leaves Berlin with a potential 2.5 billion euro hole in its budget -- a setback after the government succeeding for the first time in years in bringing Germany's deficit spending in line with EU guidelines.

Muted criticism in the German capital

German Finance Minister Peer Steinbrück is in a difficult position. The EU ruling represents a blow to his efforts to bolster Germany's financial stability. But with Germany currently holding the EU's rotating presidency, it is difficult for him to attack the bloc's legal decisions.

Germany had argued that a statute of limitations should apply on the court's decision so as to avoid unduly burdening its state coffers. After the ruling was announced, Steinbrück said he was "surprised" that it contained no such restrictions.

Last October, Steinbrück was far more critical of Stix-Hackl's arguments, calling them "grotesque, boundless and contrary to all expert wisdom" and saying they could have grave economic consequences.