This matter is confusing to Americans because the German system is very different from America. In the USA churches are supported solely by direct donations (the collection basket, fundraisers, capital campaigns, etc.). In Germany, in addition to local donations, the churches are supported by the government tax system. When someone files their taxes in Germany they declare which religion they are and a portion of their tax money goes to that religious denomination.
In Germany the courts declared that a person could declare that he is no longer Catholic and thus stop paying the religion tax. The German bishops responded by stating that anyone who declares to the civil authorities that he is not a Catholic is not to be permitted to receive the sacraments.
As the Catholic News Service noted:
"One cannot be half a member or only partly a member. Either one belongs and commits, or one renounces this," Archbishop Zollitsch said.
"Conscious dissociation from the church by public act is a grave offense against the church community," the decree said.
Is this the best way to deal with the situation? I'm not from Germany or the German culture so I can't answer that question. But its not a simple issue. Public renunciation of the faith should not be taken lightly.