While they don't have a single rule similiar to fair use they do have a long list of exceptions to copyright, including educational use, technical necessity, written and spoken political commentary, citations, and private use. In some cases more usuable than fair use, in some cases not.
Before the recent introduction of the Leistungsschutzrecht, Google News was completely legal to operate.
This is more of a case of legal bullying than anything. The Paperboy and Perlentaucher decisions have been rather clear on that matter. There have been also decisions that 10 word snippets or so are fine under citation rules.
(Ok, "completely legal" was a bit of an overstatement. It's not explicitely allowed and you would probably need large enough legal fund to defend yourself.)
Before the recent introduction of the Leistungsschutzrecht, Google News was completely legal to operate.