If you follow the Twilight War history (v1.0, not the later editions), German fragmentation is a result of World War III - Germans try and force East and West Germany into a single state while the Soviets are distracted in the Far East in a war against China.
With Germany and Poland essentially being the core European battlefields of World War III, both nations are devastated and the devastation leads to a return to a more "feudal" type existence as there's marauders roaming the countryside making central government meaningless. These feudal cantons become the new players as Europe rebuilds itself, and with histories of strongmen (and no doubt a few strongwomen) they'd be loath to give up their sovereignty. Given this particular view, that Germany is fragmented isn't that surprising. That Poland isn't similarly fragmented seems more than a bit odd to me.
The second part is that a powerful France would "blame" Germany for the massive devastation of Europe in World War III so it would encourage German regionalism to keep Germany fragmented and small (sort of like one of the old goals of the EEC - "keep Germany down"). Fracturing nations into smaller components seems to have been GDW's big idea for making the world look different from the maps of the time. Unfortunately, it led to all kinds of stupidity*.
I can see this going either way in my mind: Given centuries of division of Germany by France, perhaps the image of a "Germany" might die in the minds of the former Germans, just like the idea of a "Greater Germany" has died in the hearts of modern Austrians along with Alldeutsche Bewegung. On the other hand, there's a part of me that just feels that GDW was trying just
a bit too hard to recreate a 1800s version of Europe. Certainly GDW was progressive enough to remove European colonization of the rest of the world, but certainly the concept that no country that isn't ruled by whites is of any consequence in 2300 has always seemed laughable to me.
So what if Germany is united after WW3 and France decides to keep them together (or can't stop them from uniting)?
It would certainly be more reasonable to see all of the German possessions in the stars if Germany was doing the colonizing rather than just Bavaria (even with French backing) -- the populations in these colonies have always been a bit too high for relatively small country like Bavaria to have created.
I don't think there would be a War of German Reunification for one thing. In fact, what if France and Germany might get pretty well (just like they do IRL currently)? That would certainly make the French Arm a lot less interesting.
So perhaps rivals? Perhaps early allies leading to increasing rivalry would be more interesting? At first (until perhaps the early 2100s) Germany would be a grateful ally in return for French help in rebuilding and using France to rehabilitate their image (similar to France and West Germany). The countries may have matured to a more equal partnership between 2100-2250, with France helping Germany set up colonies and so on. Perhaps around 2200 there begins a sentiment, small at first, but growing with time, that France really isn't there to help Germany and that France is somehow "exploiting" Germany, using German knowledge, finance, and labor to enrich themselves while keeping Germany a thoroughly second-tier nation. France on the other hand would see Germany as ungrateful upstarts ("after all we did for you...").
Perhaps the Central Asian War** is the watershed. The French-led alliance goes into Central Asia, fights Manchuria and barely wins (or loses). However, a sizable contingent of the alliance forces is German, perhaps coming in second to the French. However, due to French bureaucratic problems, German units actually see a disproportionate amount of combat, casualties, and troops lost as prisoners to the Manchus than the French. This leads to a general sentiment in Germany that France starts the wars and plans the campaigns but expects to use Germans to fight them.
Tensions continue to rise in the French Arm, where governmental conflict and the passions of populations on Earth aren't necessarily French and German colonials, who suffer from the disruption of trade and economy between to the colonies a lot more ("we used to buy all of our grain from the French colony, but now the home government expects us to buy it from offworld? A loaf of bread costs 300% what it did last month and it's still rising!" / "What am I supposed to do with sixty tons of grain now? No trader is going to buy such a small lot and move it downarm, it would cost more to transport than he would make selling it? The German colony used to buy all my grain, now I'm not even sure how I am to make ends meet next season...")
Such governmental jockeying might be what is responsible for the spate of independence movements in the colonies - out of step with their home countries and chafing under the prejudices and tensions they don't share, and denied a real voice in their "home" country's government, many colonies might be considering doing the "Elysia thing" and declaring independence.
Then, of course, the Kafers show up...
* Rampant Stupidity (IMO): Texas splits off from the United States and becomes an independent country ... while Quebec remains part of Canada. Which one of these places (Texas, Quebec) has constant referendums for independence? Last time I checked, that was Quebec. That's probably one of my biggest "WTF" moments in post-Twilight history of 2300, up there with the Austrian Empi -- I mean "Austrvenia."
** Yes, the Central Asian War is fascinating to me because it's the only war that's mentioned where France gets a bloody nose.
