Does it work the other way?
Classic problem with the collision of digital services and historical legal frameworks. See also the kerfuffle with Microsoft and Ireland.
Regardless of your thoughts on the data retention bill, this is an interesting conundrum. Surely the German government is quite within its rights to ensure that information on German citizens remains physically within their own borders? What if this were a tax or health database? Presumably, having servers physically located on German soil gives them greater powers - for example the ability to physically seize equipment if the requirement arose.
Is the EU expecting that if Germany is not allowed to legislate to keep information within its own borders, that they are granted reciprocal powers to raid physical locations in other member states?