You mean if one were to send an email from Munich to Paris, it'd cross the Atlantic and come back?
NSA aside, that's a pretty sucky setup.
It's how the Internet works. To quote directly from the experts: A target's phone call, e-mail or chat will take the cheapest path, not the physically most direct path.
Physical distance is not as important as congestion on the routes. So it might very well be that your data takes a much longer path that what you'd think, simply because it uses the fastest way, not the shortest.
Angela Merkel's approach is pretty idiotic, and it cannot fix the problems. First of all, most emails are routed through the US either because the sender or the recipient has an American email provider (Germans love Gmail, too). Secondly, even if that is not the case, can you be sure that the NSA doesn't spy on traffic in Frankfurt? It wouldn't surprise me.
Only true end-to-end encryption can be a solution. The government in Germany is currently pushing for DE-Mail, which relies on transport encryption only. So that means that your email provider can still snoop and so can the German government, which is probably the reason why they designed it like that in the first place. End-to-end encryption would have been possible, especially since the German government is spending much money rolling out their own PKI, with keys for every citizen right on their new national ID card.
There's a presentation about DE-Mail from last December's Chaos Communication Congress, it's worth watching (video also has an audio track with English translations).