Yes (somehow). In Germany you must not submit any letters of reference together with your application for faculty jobs.
Instead of recommendation letters, the search committee will find reviewers to write reports on the shortlisted applicants (often each reviewer reviews all shortlisted candidates in one letter). Also, it is not even necessary that the reviewer knows all the candidates personally and there are even rules that forbid to review somebody who has too close relations to you (believe it or not, the PhD advisor is explicitly forbidden...).
So, most typical "letter writers" in the US system will not play any formal role in the hiring process in many states in Germany. However, it is still important that you are part of some research community and that your work is known and appreciated. In principle, a reviewer who does not know you personally has to (and will indeed) have closer look and your papers and will judge their importance, comparing you and your work with the other applicants. So if you do really great work and can present yourself well in an job interview, you will get hired without any "letter writers".
In view of this, saying something like "in the German system it is all about who you know" is out of place. It is about you, your work and the community.