Ankara responded by threatening to tear up the agreement struck in March to halt the refugee flow through Turkey, which has already seen millions of people pour into Europe from the Middle East and elsewhere.
Now the potential fallout from the renewed tensions is enormous: Europe’s bulwark against another wave of refugees is hanging in the balance while the political stakes for German Chancellor Angela Merkel have increased dramatically.
Ms Merkel spearheaded EU negotiations with Turkey, going out on a limb to seal the deal.
The agreement aimed to keep asylum seekers from entering Europe and helped Ms Merkel fulfil her promise of a marked reduction in the numbers making their way to Germany.
Its collapse could undercut her authority as Europe’s pre-eminent leader and could also jeopardise her hopes of leading her party at next year’s national elections.
The court’s decision came amid fears of violence. Concerns are mounting that unrest in Turkey triggered by last month’s failed military coup and the detention of thousands could spill over into Germany. The country is home to about 3 million people of Turkish background.
“Many let their frustrations and feelings of discrimination in Germany out at pro-Erdogan rallies,” said Gokay Sofuoglu, head of the German-Turkish community association.
“Erdogan has given many Turks here a sense of honour and pride.”
Turkey is now demanding its 78 million citizens be given visa-free travel through Europe by October or it will derail the refugee deal.
Visa-free travel rights through the Schengen zone of 26 European states was part of the agreement. But the original June deadline has come and gone.
Berlin has joined its European partners in demanding Ankara meet all the 72 conditions set for lifting the current visa restrictions.
These include meeting human rights benchmarks and rewriting the country’s stringent anti-terror laws.
Only one condition has so far been met.
German Vice-Chancellor Sigmar Gabriel is standing firm against the Turkish threat, declaring “Germany and Europe should under no circumstances be blackmailed”.
Resistance to the visa waiver for Turkey has been rising in both Ms Merkel’s conservative Christian Democrat-led bloc and several EU member states. There are strong fears the move would pave the way for a new wave of Muslim migration into Western Europe.
Leading the sceptics is Berlin’s number one ally, France, where President Francois Hollande is facing a tough re-election fight in the first half of next year.
Tensions between Ankara and Berlin have been building for months. Turkey’s hardline President was infuriated by the German Parliament’s resolution in June which declared the killing of more than a million Armenians at the hands of the Ottoman Empire a century ago was genocide.
Turkey, the Empire’s successor state, responded by recalling its ambassador to Germany for consultations with Mr Erdogan and lashing Chancellor Merkel for failing to head off the parliamentary vote.
Ankara’s human rights’ record and media crackdown has also come under fire from German political leaders, who claim Turkey is increasingly out of step with western European values.
Freedom of speech has been a sore point since German comic Jan Boehmermann lampooned President Erdogan in an obscene poem earlier this year.
When the Turkish leader’s demand for legal action against the satirist was allowed in German courts,critics claimed Ms Merkel was allowing freedom of speech to be curtailed in Europe to safeguard the refugee deal.
The German Court decision last Sunday banning President Erdogan from addressing the support rally gave Turkish political leaders ammunition to hit back. Justice Minister Bekir Bozdag described it as a “disgrace” for democracy, adding that Germany could no longer lecture Turkey on human rights and freedom of expression.
“Germany is not a friend, but an enemy,” declared the Turkish newspaper Yeni Akit in a headline. Another Government friendly newspaper, Aksam, was more direct. Its headline read: “Heil Merkel!”
President Erdogan’s high-handed approach to Berlin underlines the political leverage he feels he can wield. Europe is struggling to avoid the political backlash that would follow a new rush of refugees should Turkey lift the floodgates.
Ms Merkel has few options as she waits to see whether Turkey will stick to the October deadline Ankara has imposed.
The failure of the migrant deal could force her into a costly U-turn.
By abandoning the policy of keeping most refugees out of Europe Ms Merkel may be compelled to strengthen national borders, which she has long resisted despite demands from her critics.