I get what you're saying but in this specific instance, Google was right to delete them from news.google and the general index. The newspapers can't have it both ways (pay us to show up on Google News but keep us for free on Google Search).

See my comment below, but to recap the point, Publishers don't necessarily understand the value of being listed by Google. Not listing them is both the fastest, and most difficult to argue with, way to educate them as to that value.

Invalid generalization. If you want money to be part of the index, they should be able to remove you.

But everybody knows this ... Google knows it, we know it, and Google knows we know it.

Google knows that although they could get away with a lot in the short-run, abusing this power would hurt them badly in the long run. They gain huge benefits from being seen as more or less neutral (to the extent possible—some people will never view them that way).

As a result they seem to have been very, very, careful in how they use this power, only wielding it when explicitly ordered to by an authority with power enough to force the issue.

I'm sure the humans at Google are often tempted (who wouldn't be?), but they appear to also be smart enough to resist that temptation...

Since Germany is a populous and wealthy country, Google has a strong commercial interest in not removing German content. It's hard to imagine what nefarious thing Google would force Germany to do this way.

why there are other Publishers that will step in to fill the gap New Scientist has just launched a German language site for example.

It suggests you might just want some competition in search department. Why not defect to Bing?