The Germans are coming

Just before the final credits of Florian Henckel von Donnersmarck's astonishing, Oscar-winning film, The Lives of Others, start to roll, a shop assistant hands over a book. Ulrich Mühe, who plays the ashen-faced Stasi intelligence officer, Gerd Wiesler, is asked if he wants the book wrapped. "Nein," he says. "Es ist für mich [It's for me]."

The audience at screen one in the Clapham Picturehouse - full to the gills some three weeks after the film started its run - laughed as one - and then went deathly silent. To know what provoked this reaction, you have to have seen the film. But chances are, you've already seen it. The Lives of Others - despite the unusually warm spring weather surrounding its release, despite depending on subtitles, and despite (this is the most extraordinary part) being German - has been a smash in Britain. Indeed, this film, with a budget of just $2m (£500,000), has taken $24m worldwide at the box office.

How has this come to pass? German cinema used to be the preserve of beret-toting university lecturers and media pseuds. Now, it seems, it has become the opiate of the popcorn masses. And not just German masses. Punters in Britain, America, Spain and Italy are forking over to see some extraordinary German films, of which The Lives of Others, Downfall, and Goodbye Lenin! are only the most successful.

Before 1998 - when Run Lola Run, Tom Tykwer's spiralling story about a woman who must find DM100,000 in 20 minutes, astonished festivals, and then cinema audiences, around the world - German cinema was a joke. Until then, if you were talking of German cinema, you talked of the great 1970s directors: Werner Herzog, Wim Wenders, and Rainer Werner Fassbinder. Few people ate popcorn in a Fassbinder movie.

Run Lola Run changed everything. Twyker showed you could produce a high-concept German film with commercial possibilities. True, Run Lola Run did not make anyone wildly rich, but it provided a template for future productions. And, importantly, it awakened the film world to the fact that there was talent and ambition coming out of Germany.

Now, this bold new industry has produced, in the past four years, The Edukators, Head-On, Requiem, Downfall, Mein Führer, Nowhere in Africa, Goodbye Lenin!, The Lives of Others and more. Where has this come from? And why is so much of it so good?

"There has, generally, been an attempt to marry arthouse sensibilities to a more commercial outlook," says Nick James, Editor of Sight and Sound magazine. "That's made the [German] scene very interesting. It's clear some of the directors have one eye on Hollywood, while others are more intensely artistic. But when you get that combination, you have a spark, a magic ingredient."

"What has really bolstered the directors' output, as well, has been the film festivals," he added. "Germany now has a much stronger representation at film festivals, and their own, in Berlin, has become a much bigger deal. In his four years as director at Berlin, Dieter Kosslich has made a real effort to boost German cinema. He's done so much more than his predecessors." (Indeed, when Kosslich took over in 2002, local films took only 12 per cent of Germany's box office receipts. Last year, that figure had jumped to 25 per cent.)

Kosslich's enthusiasm has ensured that Germans now watch more films that mean more to them. Indeed, one thematic strain in the past few years is a willingness to confront the painful recent past. Goodbye Lenin! and The Lives of Others have dealt with a divided Cold War Germany, while Downfall, The Counterfeiter and Mein Führer have confronted the Nazis.

Mein Führer met with mixed reviews. A knockabout comedy about a depressed Hitler in 1944, it was directed by Dani Levy, a Swiss-Jewish director who has peddled a line in Nazi-angst movies, including Go For Zucker! and The Giraffe. But the main complaint, from German audiences at least, was not that Mein Führer was offensive, but that it was not funny enough. Does this perhaps indicate a new confidence in Germany?

"Certainly, this generation does not feel quite so burdened by the aftermath of World War II," says James. "They've shaken that off, and they're looking at their history, and in particular the East, and what that meant for them. And the very fact that Germany can even cope with the idea of having a comedy about Hitler suggests to me that Germany has moved on."

Of course, it hasn't all been Nazis and spies. Fatih Akin's glorious German-Turkish story Head-On, for example, deals with a German love story for the 21st century. Two German Turks meet in a hospital. The girl is shackled by her family and asks the man to marry her so she can escape them. As the title suggests, this is a movie about two cultures that continue to clash and meld in modern Germany. The story is told deftly. Head-On won the prestigious Golden Berlin Bear at the Berlin Film Festival.

Germany, then, has directors with talent. One group, who are loosely called the "Berlin Group", or the "School of Cool", can be found in the capital, and are loosely centred around the director Christian Petzold. As with any journalistic shorthand, the group is not a solid entity, but the Berlin directors do have an arty slickness to their work, as could be witnessed with two entries to this year's Berlin Festival: Petzold's Yella, and Stefan Ruzowitzky's The Counterfeiter.

To look at how these gifted directors can produce a number of high-quality films on slender budgets, you must look to the lack of star names. It has been reported, for instance, that the cast of The Lives of Others took significant pay cuts to work on a script they admired. As a result, Von Donnersmarck was able to put together his handsome film with a breathtaking cast for less than $2m.

"It's been one of the truisms in world cinema that you need a star name to be able to transport your film around the world," says Andrew Dawson, Total Film magazine's foreign specialist. "If you look at French cinema, for example, their films are often transported around the world on the basis of a star name - Gérard Depardieu or whoever.

"But if you think about The Lives of Others, those actors were only well-known in their own country. In Downfall, Bruno Ganz was reasonably well-known, but again, he's not Gérard Depardieu. So, what is carrying these films is not stars, but stories. Directors and producers and writers find great stories, and then find a cast to match. German actors don't make huge money from their films but they do make great films."

One of the unintended side-effects of using home-grown talent at cut-price rates in their films is that those actors have become big names in Europe and America. Julia Jentsch has landed a part in I Served The King of England after her role in The Edukators. Martina Gedeck has appeared in The Good Shepherd. Diane Kruger is soon to appear in Goodbye Bafana. German talent, it seems, has never been so in demand.

Chris Auty, the executive producer of Crash, Bright Young Things, and My Summer of Love, believes that it's just a question of talent. German actors, he told The Hollywood Reporter, "have outstanding English and fantastic acting. [They] are simply not comparable with their Italian or French counterparts. They are streets ahead."

German acting talent, as well as lighting up the screen, can play a serious role in raising money for a film's distribution in Europe. Germany is now a huge film market, and having a German film star on the marquee can convince sceptical moneymen that a movie stands a chance in Europe's biggest film territory. What's more, because Germany now makes so many films, it has a great number of technically proficient film-makers - editors, producers and cinematographers.

"The shoots are cheaper," says Dawson. "That's because those on the set, and those in creative areas have gained much more experience. Now Germany has more people who are able to do the jobs needed to make a film. It's a case of success breeding success. The more people work on films, the more the industry feels able to call on those people to make the next film."

The Lives of Others has no special effects. It has no actors whom a British or American audience would easily recognise. It is long, in German and makes no apology for the grim, grey world of East Berlin in the mid-Eighties. It does not finish where you expect. It is not in three acts. In short, it breaks all the rules.

But Von Donnersmarck's film, like an increasing number of German productions, has become a hit. Why? Because Germany, in the early 21st century, is alive with great stories. Because Germany has confronted its historical situation head-on. Because their bold new cinema prefers actors to stars; plots to clichés; characters to cut-outs. As such, German movies have now become truly populist. At the conclusion of The Lives of Others, it was not just Ulrich Muhe, but the entire audience, who were left thinking: "Es ist für mich."