Other ways in which Germans guard their societal structure:
-- highly regulated Sunday opening hours, even in big cities, ostensibly to protect low status workers.
-- strong rules regarding jay walking; it's the only country where other pedestrians got upset with me for crossing the street incorrectly.
-- strict adherence to rules and procedures in aspects of life that most cultures don't care about (clear your sidewalk of snow and ride your bicycle only on the correct side of the sidewalk, for example).
-- strict adherence to a close family model that promotes appropriate education, shared meals and shared community endeavours.
All these things make up a strong societal structure (if a little inflexible). I believe that there is a national desire for a straightforward, trustworthy communal structure. The 'obsession with titles' is simply a facet of the desire for a strong shared community which can act as a basis for a productive society. If people assume titles that they do not deserve then they reduce the quality of societal markers, make communal life more difficult and thus reduce productivity and progress. Add that to the somewhat natural tendency to tear apart any person of previously high societal status, and you have the current climate of Germans checking all advanced degrees (and to an extent, the British checking all the expenses claims of their own politicians).