Limburg - Catholic clergy who wanted to sue Germany's disgraced "bling bishop" for using church funds to build a luxury home said on Wednesday the case is being dropped.

Following last year's removal of Bishop Franz-Peter Tebartz-van Elst, the diocese of Limburg said it would not be applying for money damages from him in the Catholic Church's own courts.

Tebartz-van Elst earned the moniker after spending $35m of church funds to rebuild his lavish home in Limburg with fixtures that included a two-seat bathtub and bronze window frames.

He was also assailed for flying first-class to anti-poverty projects in India.

Suing an ex-bishop requires clearance from Pope Francis's staff. The diocese said Manfred Grothe, the interim head of the diocese, was told at the Vatican by Cardinal Marc Ouellet, prefect of the Vatican Congregation for Bishops, to drop the case.

"The congregation considers a review of damages as inappropriate," the diocese said in a statement.