This is just ravening insanity. Germany has long had an excessive culture of censorship (I can still remember getting Carmageddon and seeing the green blood. It didn't take a whole lot of research to find that this was the fault of German censorship), but this is really going too far. Imagine how easy it would be for a judge, probably never having played a game, to pass a sentence for some minor infraction of this law, and set a dangerous precedent.
I'm not sure whether this will ever make it into German law, or whether it will ever be enforced, but it's pretty terrifying. Crytek have made it clear that they will leave the country, should this law be passed. Probably wise, as it would essentially make every member of their staff a criminal, simply for manufacturing a piece of entertainment that any right thinking adult has the right to purchase and use.
I recognise that this is a response to two genuine tragedies, but it should be clear to even the most frothing of right-wing fanatics that it is an ill-thought, knee-jerk response. If someone is mentally unstable to the point that they could really even consider killing another human being, they will almost certainly find a trigger anywhere. I've been playing games since I was five years old, and I still don't know how to fire a gun. It's not analogous. Hopefully this will all blow over, as it has in the past. Given the nature of the current German government, though, I find this unlikely.