Cornelius Gurlitt’s father bought and sold art under the Nazis, including works looted from Jewish homes and works bought from Jewish owners under duress.
The collector’s lawyers accept a small portion of the works may be disputed.
But the great bulk of the trove, they say, is the collector’s for him to do with as he wishes.
Cornelius Gurlitt has been recovering from heart surgery and it is not known how he has reacted to the decision.
The immediate likelihood is that the paintings, some by Matisse, Picasso and other masters, will remain in a secure warehouse in Bavaria while legal disputes continue but the prosecutors’ decision implies he has a right to them.
A smaller number of works found at a property of Cornelius Gurlitt’s in Austria are not affected by the German decision.
Wednesday’s decision came shortly after the collector agreed to co-operate with the authorities to determine which of the paintings had been stolen by the Nazis and to enable their return.
Augsburg prosecutor Matthias Nickolai said in a statement that the works had been formally released after prosecutors re-evaluated the legal situation. Prosecutors, he said, had been “absolutely convinced” at the time of the seizure that it was legally correct.
Cornelius Gurlitt’s lawyer, Tido Park, said his “rehabilitation [would] be further strengthened” by Wednesday’s decision.
“So this is a good day for Cornelius Gurlitt,” he added.
The collector’s lawyers have agreed with the German authorities to return any works proven to be looted to their rightful owners but they believe that to be only 3% of the trove, and it will not be easy for claimants to get them back. There is a one-year deadline on proving ownership.
The lawyers say that just over 300 of the works are without doubt Cornelius Gurlitt’s because his father acquired them before the Nazis were in power.
Only six paintings are so far being claimed by other people. In the case of one of those paintings – a Matisse – the lawyers say there are now two competing claims.
Negotiations between Cornelius Gurlitt’s lawyers and claimants have been tough.
According to the Sud-Deutsche Zeitung, one claimant replied to an offer to sell back a looted painting in blunt, Anglo-Saxon words of one syllable.
There has been outrage among Jewish groups, who say that the authorities in Germany have made it very difficult for people to get their rightful property back.
The prosecutors were heavily criticized for not publicizing the fact that they had found the trove of pictures. It only emerged in the press a year later.
At the end of it all, it seems likely that Cornelius Gurlitt will keep all but a small part of the collection built up by his father.
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