It's out of LH's hands. (And this won't impact just LH, but all tickets on all airlines sold in Germany. Or is this "ruling" somehow restricted JUST to Lufthansa?).

If, as the OP implies, every ticket sold in Germany has to become almost completely flexible, then all airlines will suddenly find that their old model - where differentiated pricing was offered on the basis of differentiated tickets (after all, the seat/journey is the same, the only "difference" are the restrictions applied) has suddenly been torpedoed. As regards cancellations, there is no longer any differentiation allowed in the German market.

As such, they will be under pressure to increase the ticket prices. Flexible tickets are charged at a higher rate, because this was an add-on. If they don't adjust their prices, why would anyone buy a higher-priced ticket? The cheapest discount-economy ticket will do - they can change their mind at any time, and cancel for a full refund.

There will be no incentive anymore for the airlines to offer cheap tickets, because every ticket they sell will now actually have the main feature of their most expensive tickets - full flexibility.