The story is deliberately preposterous. In fact, it *must* be preposterous in order for the metaphor to work. A disfigured concentration camp survivor "Nelly" undergoes facial reconstruction which makes her so unrecognizable that her own husband doesn't recognize her; instead he insists that his wife is dead. But he wants to use Nelly as an imposter so he can collect her inheritance.
If this brings to mind the idea of Nicolas Cage and John Travolta swapping faces in the awesomely bad "Face/Off", then you're not far off the mark. But listen up, here's why it works perfectly.
The theme of "Phoenix" involves how people face an unacceptable past. There are 3 main characters who each personify a particular, extreme response. It has to be extreme, it has to be preposterous, and most importantly we have to accept it. Either that or just walk out of the theater after 5 minutes and watch Monday night football instead. Our 3 characers are: 1) Nelly - she cannot let go of her traumatic past, and at the same time she has no past because she has no identity, figuratively and literally. 2) The husband "Johnny" - he utterly rejects the past, for reasons you'll figure out soon enough, and so he refuses to recognize his wife. In fact, we get the feeling that even if she were the spitting image of herself, he would still refuse truth. Such is the nature of psychological denial. And 3) We have Nelly's only friend "Lena" who has become a tireless political activist, saving survivors and trying to keep the past "alive" even though she is confronted with a society that has already moved on.
So you see how this story isn't supposed to be taken as a literal drama but rather as a very creative metaphor to illustrate how psychology works in 3 vastly different personality types. Further driving the surreal nature home, we have gorgeously shot, vividly composed visuals. If you ever wondered how Film Noir would look in color, then look no further. There have been a few contemporary classics which sought to bring Film Noir into the modern age, such as 2005's "Sin City" with its introduction of red to the crisp b&w palette, or before that was 1994's "The Crow" with its use of extreme darkness and "dead" colors. Here in 2014's is the next decade's evolution. In this case there is bold use of colors, but they are distinctly and "impossibly" presented: a dark alley is illuminated with a ghostly red light even though there are no red light sources to be seen, or a dark scene of bombed out ruins has unrealistic islands of light illuminating patches of rubble, all in vivid color but with stark contrast against the black spaces. The cinematography and lighting is as purposely unrealistic as the plot.
Ultimately if you grasp all of this, or if you just decide to go along with it for the sake of seeing how everything turns out, your suspension of disbelief will be amply rewarded. As nearly every other reviewer has noted, the ending is fantastic. Beyond fantastic, it's the whole point of the movie. In an interview, director Christian Petzold says the entire story comes down to the last 3 minutes, and that's where it will either come together or utterly fall apart. For my money, it's a total winner. "Phoenix" definitely does NOT crash & burn.
