Unless records remain of the discussions leading to the making of this film we can only guess at what its aims were. Comparatively expensively made with many staged scenes it appears heavily indeed entirely propagandistic both crudely and in more subtle ways.
The song emerged when it was broadcast to German troops during WW2 and became an enormous entirely unanticipated hit. British troops fighting abroad heard it on these German broadcasts and most remarkably it became a hit with both sides of the conflict. The song itself is sentimental and wistful and, having as its subject a woman, Lili Marlene, presumably reminded both German and British soldiers of wives and girlfriends left behind at home. These deep emotions evoked by the song presented propaganda opportunities, it also presented dangers.
In the early stages of the war when German morale was high such a sentimental song presumably was judged to be comforting for their troops hence their immense exploitation of it as the film makes clear. As the war turned and huge and bitter defeats replaced easy victories, such sentimental reminders of a homeland and loved ones that many increasingly believed - rightly - that they were never to see again would have been deeply damaging to morale. The film makes this point explicitly and with much detail, also the enormous extent to which the Nazis had at first exploited its popularity only to abruptly banish song and singer when their fortunes began to turn.
The bond the song had formed with British troops presented an opportunity to the Germans and consequent danger to the allied war effort in that there must have been considerable curiosity on the part of British troops as to its the origin as well as to the identity of the singer. The Nazis could have greatly exploited this vacuum by producing a calculated propagandistic version of the song's origin and the identity of the singer also to give it new English words in order to channel this curiosity and the song's allure to British troops.
Instead the film preempts this by doing exactly the same thing butin the reverse direction by giving its own (British) version of the history of the song including the fate of the young singer - we see her interned in a concentration camp. The film concludes with a re-worded rousing defiant version of the song in English, mocking Hitler and referring to those same women in German hearts who had now become "hollow-eyed widows and mothers" and looked at the Fuehrer in deepest bitterness.
The film ends with a morale-raising fictional vision of an immediate post-war East End of London (the most extensively bombed in the country?) street scene with shop lights ablaze and barrows piled high with fruit where the tune is played for the last time (on a barrel-organ - the most typical East London street sound) finally claiming British ownership of it as a song of hope and peace
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