Hi Aleksandar, I'm very glad you notice this small defect in Google's translations.
When you select German from the toolbar OR the drop-down, things work great. But when you try and switch back to English, it will not translate back, except when you use the drop-down, which then gives you the weird-looking letters.
Also very important to know if that there is a difference between "Default Language" and "German" (in your case). German is the hard-coded German translations, and "Default Language" is the function used to bring your website back to it's original state, which is what everyone usually wants.
Somehow that is not happening correctly with your site, and some other sites in Germany (and very select few others around the world).
These could also be website hosting issues specific to each server, so it's very difficult to pinpoint the issue.
Aleksander, I do have a fix for this in my Premium version of the plugin, because I use custom functions to access the languages, so I can bypass the default translate function.
I will add this manually to your site if you want, although it will be a custom-version of the existing plugin, and you would need to wait to update until future updates are made.
Just let me know how you would like the translator to look and I will try and patch it for you. (i.e. tell me the flags you want, and the also what languages to show in drop-down, and if you want to show drop-down). I will just pull some of this functionality from my premium version, so it will not be too much work. I will not need to charge for this.
But in future cases, now that we are seeing issues with specific websites, along with Google's functionality issues, I will likely need to start charging to fix these bigger issues, since they are not plugin faults.
I enjoy helping everyone, but I must use my premium version to get things fixed and this takes a good amount of time for each site.
Please let me know if I can help fix your website.