Are handlebar-mounted child seats illegal in Germany?
Front-mounted child seats are not illegal in Germany but face stronger restrictions than seats mounted in the back. Good sources and discussions (in German):


http://www.gesetze-im-internet.de/stvo_2013/__21.html (the law)
https://www.verkehrswacht-medien-service.de/kindersitze_fahrrad.html (good overview from a reliable source)


You need to consider in addition what kind of seats are adequate as covered by norms which provide the restrictions I alluded to:


http://www.kinder-fahrrad-sitz.de/stvo-ece-r44-din-en14344-praktischerklaert/
http://www.bike-eu.com/laws-regulations/artikel/2010/8/en-14344-european-standard-for-childs-seats-for-bicycles-1018845 (good explanation in English)


The EN 14344 norm is electronically available and covers every detail imaginable. It says in particular about front seats:


  8.3 Additional requirements for front seats Front seats shall have at least one attachment point to the cycle, which shall not be the
  handlebar or the extension of the handlebar stem.