Strange they didn't even consider Google Docs or web for the purpose. It is quite understandable that experience with OpenOffice is not as smooth as it is with Microsoft's word or Apple's iWork, but why not give web a chance and then decide this?
As it is Governments are supposed to explore all options and then choose the 'technically acceptable most economical' option? I think Google docs will be sweet and better in some ways for the council, considering that these entities are in dire need of more collaboration.
I doubt that many European government organisations would be allowed to use a SaaS app provided by a US company, purely for data protection reasons. There are rules surrounding where personal information may be stored - due to, among other things, the USA PATRIOT act, the US is not usually an option for organisations that deal with personal info.
They cannot. There are quite strict laws regarding usage and handling of personal data, especially for government and other state bureaucratic things and that pretty much rules out Google Docs or any other cloud-based provider. They're fine for personal use and companies might opt using them too (although depending on what they do, it could well bring them into legal trouble too), but for governmental work, especially in Germany it's a big no-go.