American Fable is ambitious, maybe too much so sometimes, but there's an intense pleasure in the boldness of the film's style.
Felice is Jewish and a lesbian, in Berlin in 1943--which means she is walking around with a suspended sentence of death. She takes incredible chances. She works for an underground resistance group, and her daytime job is as the assistant to the editor of a Nazi newspaper ("What would I do without you?" he asks). Her strategy is to hide in plain view; her boldness is a weapon. Then she falls in love with Lilly.
Lilly (Juliane Kohler) is the mother of four. Her husband is away at the front. The first time we see her, she is at a Beethoven concert with a German officer--not her husband. She cheats. He cheats, even with their nanny. It is wartime. One night at a club, Lilly is swept up by Felice (Maria Schrader) and her friends; she's too naive at first to know they are lesbians, and doesn't figure out Felice is Jewish until she is finally told. Why would you suspect that of an employee of the Nazis? "Aimee & Jaguar" (Lilly and Felice's pet names for each other) is based on a true story. Lilly Wust is alive today, at 85, and is the subject of a book that inspired the film. Felice almost certainly died in the concentration camps; her death was hastened because Lilly heedlessly tried to visit her there, calling the wrong kind of attention. War is a time for desperate and risky love affairs, but theirs was so dangerous it was like an act of defiance against the laws, the state, the world, all set against them.
It is pretty clear that Germany is losing the war, that the end is not far away; the bombs rain on Berlin, and through her underground sources, Felice knows even better than her editor of the German defeats. The movie suggests that a few Jews who did escape identification were able to survive in a sort of shadowland. Early in the film, a German woman in a restroom sells food stamps to women she knows (or assumes) are Jewish, and later other Germans know Felice's secret but do not reveal it. They support a genocidal state, but are unwilling to take personal action. There is even a subtle and delicately written scene suggesting that the editor of the Nazi paper realizes Felice is not what she seems, and chooses not to know.
For Lilly, love with Felice is a revelation. At first she doesn't even realize her new friend is a lesbian, and when Felice kisses her, she reacts with horror. On reflection, she is not so horrified at all, and soon they are lovers. There is a sex scene in the movie, not graphic in its visual details but startling in its intensity, that is one of the most truthful I have seen. Most lovers in the movies are too in command; the actors fear the embarrassment of lost control. A person having an orgasm can look funny, even ridiculous, to an outsider, which is why you won't find many movie stars who really want to fake it all that well. When Lilly and Felice make love, there is a trembling, a fear, a loss of control, that colors all the scenes that follow.