Most Germans I know come out for the dry side. This has usually to do with the fact that they have never even tasted a fine "sweet" Auslese from a leading producer. They simply don't know about the great sweet wines of Germany. All they know about is the sweet plonk in the supermarkets, and they will not be seen dead with a bottle of that stuff near them. They have developed almost an allergy to residual sugar in wine.
Outside of Germany, opinion is divided again, between those who only know the sugar water but don't know that there are any dry German wines at all, and hence normally reject German wine altogether, and those who know and appreciate the finer sweet wines but have not come across a good dry example. The latter are not to be blamed for their ignorance. It takes a Sherlock Holmes to locate a fine dry German wine outside Germany. Little wonder they usually argue against dry German wines.
The issue is so prominent in debates about German wine because it carries so much historical baggage. In previous centuries German wine was mostly dry. There simply wasn't the technology to stop fermentation, or to sterilize musts and add them as sweetening agents to dry wines. Germanies climate being as cool as it is, it is clear that the main problem was to produce a wine that wasn't acidic and harsh. Only under exceptional circumstances, in the greatest of vintages, one would find sweet wines in Germany. No wonder these wines were revered and commanded the highest prices. In the old days, great wine was sweet wine. Then came technology, and everything changed. It became possible to produce wines of any chosen level of residual sugar. Sweetness was no longer dependent on favorable vintage conditions, but on the decision of the wine maker. The market wants sweet wine, so the market gets sweet wine. That was the slogan in the post WW2 economic recovery. It was the birth of the sugar water. Eventually, the more critical consumers became sick and tired of these wines, and demanded German wines that tasted more like the French or Italian wines they had learned to like in the meantime. Now, sweet wine was bad wine. The domestic market no longer wanted sweet wine, so the domestic market got dry wine again. This was the the birth of acid water: the bad habits of sugar water production, high-volume low-cost low-quality mass production, were largely kept, only the residual sugar was left out. Such wines were often neutral, harshly acidic, and unbalanced. They were revered by the gurus for only one reason: they were not sweet. The export markets meanwhile swallowed the ocean of sugar water that could not be sold at home, and a few drops of fine sweet wine.
Sweetness took the blame for the poor quality of most German wine, because it was used to cover up the blandness and emptyness of so many wines. But sweetness is not the root of the problem. Blandness and emptyness is! More and more, this is being understood in Germany. We now see more dry wines that no longer need a dose of sugar to make them palatable. Very slowly they even begin to penetrate the export markets, in tiny numbers. One the other hand, more Germans discover that sweetness can be more than a cover-up, that it can be an integral part of a style of wine that is rightly admired by a small number of devotees around the world.
Among those who know good German wines of all different kinds there really is little argument about dry wines from Baden, Franken, or the Pfalz, or sweet dessert wines from Mosel-Saar-Ruwer and the Rheingau. But there still is quite a bit of disagreement about the merits of semi-sweet lighter wines, like Kabinetts with noticable residual sugar. Some argue that at least for these wines sweetness really just masks the lack of extract and ripeness. I think this is wrong. I don't mind extract, but higher ripness is not easily achieved in our latitudes, and residual sugar usually makes those low alcohol / high acidity German wines far more pleasurable to drink. If the balance is right such wines are really semi-dry and fruity rather than sweet. I would regret to see them replaced by a larger number of hard and joyless, but "serious", dry wines.
On the other hand, there are those who argue that while southern regions in Germany may be well-suited for dry wine production, the northern regions, MSR in particular, are not. They should stick to what they are known for, and what they do best. Again, I disagree. Having tasted the results that some committed growers have achieved in good vintages, with low yields, and high ripeness, I claim that MSR's potential for great dry wines is enormous, but to realize it it takes a particular effort and favorable circumstances. Under those conditions, the results leave me in no doubt that I would regret if such wines were not being made.
Where does this leave us in relation to d'Yquem and Montrachet? It is easy enough to name a sweet German wine on the level of the former (the dessert wines from Egon Müller, J.J. Prüm, or Robert Weil will do nicely), but for the latter I have to admit that I simply don't know. I believe that the greatest dry German wines are still to come, when the best winemakers use their best grapes from their finest vineyards with no effort and expense spared. Maybe we will see a German Montrachet emerge. In support of this hope I would refer to the great dry Rieslings from the Wachau (like F.X. Pichler's 'M' cult wines) or Alsace (like Clos St. Hune). Who will be able to afford it is another question.
The best German dry Rieslings are sold as "Grosses Gewächs" (GG) or "Erstes Gewächs" under the somewhat controversial sheme set up by the VdP. Whether this sheme has in part caused the quality improvements is a matter for discussion. It certainly seems to have helped raise prices for top end dry German wines, including ones of rather mediocre quality. Not all GG wines are as good as Keller's or Dönnhoff's. These two estates are run by inspired and supremely gifted men, who do not need VdP shemes to help them make great wines. Their achievements are inspiring other young wine makers to aim higher, and the future of top end dry Riesling from Germany looks brighter than ever because of that. But these two are also great examples for how to make affordable dry Rieslings for every day drinking that are not at all suffering from the vices of the drab "trocken" wines we see still far too often.