The Federal Constitutional Court in the south-western city of Karlsruhe decided the nine-member body violated the rights of the 611 other Bundestag lawmakers, chief justice Andreas Vosskuhle said.
Budgetary policy, which includes decisions about the euro since it involves public money, “is the responsibility of the whole Bundestag”, Vosskuhle said, adding the committee therefore constituted unfair treatment.
However, the judges did concede that decisions about the buying of sovereign bonds on the markets could be made by the nine-member body because of the need for confidentiality.
The Bundestag created the panel, comprised of members of all the parties in parliament, in October, with the aim of enabling Germany to take quicker action to fight the crisis.
In particular, it was to have made decisions on the use of the EFSF bailout fund for debt-wracked European nations after the fund’s head, Klaus Regling, insisted on Germany creating a rapid-response body to head off turmoil while markets await action.
Depending on the urgency of the measures, the entire Bundestag, the 41-member budgetary committee or the nine-member panel would have been tasked with providing approval.
But two opposition MPs filed a complaint to stop the nine-member body from taking any decisions on the European rescue fund arguing it infringed their parliamentary rights.
Bundestag speaker Norbert Lammert, a member of Chancellor Angela Merkel’s conservative Christian Democratic Union, said the court’s ruling was “understandable”.
But he acknowledged the options for making the quick decisions needed in the midst of the eurozone crisis were limited.
“I am convinced we are going to resolve that,” he added.
In September, the Court gave parliament a bigger say in decisions on saving the euro.
The decision raised concerns that it would slow Germany’s reaction in crisis situations when speed is vital.
On Monday, the Bundestag was called upon to vote for the seventh time in less than two years on measures for saving the euro, endorsing a second, €130 billion rescue package for Greece.
But Merkel is under growing pressure from the German public and some lawmakers over bail-outs, while also facing calls from international partners to agree to scale up the eurozone’s financial firewall.