It's not illegal to fire people in Germany. But just like most of Europe they need to provide some "just cause [1]", unlike in the US where there are a lot more "at-will [2]" employment contracts.

Left wing economist believe this is a great feature that makes lives much better for employees. Right wing economists believes this a bad feature that only protects incumbent employees and makes employers less inclined to hire in the first place or waste resources on workarounds like temp-agencies. Neither standpoints can be conclusively proven, so is mostly a matter of ideology.

[1] https://en.wikipedia.org/wiki/Just_cause_(employment_law)

[2] https://en.wikipedia.org/wiki/At-will_employment