[malaxii]

This is a common practice in Europe as I understand, not just Germany.

The thinking as I understand it goes along these lines: there are requirements to get a degree (thesis, pass exams, score high enough in exercises), but the university is primarily a center for learning and you are an adult, so how you achieve the abilities to fulfill the requirements is your own business. If you want to do things on your own, you are free to do so.

[Fronzie]

Also, it is seen as a test by itself: Are you capable to take your responsibility and do your work?

This is a quite valuable lesson by itself. Most people need a few months to learn it (partying is fun, but doesn't get you a degree), some don't and indeed drop out.