If so, what happens then?
In principle, nobody can forbid dialing in via a VPN.
However, by concluding the terms and conditions, you agree that you will only watch content that is intended for the German market. If you watch something else via VPN, you are violating this contract and could possibly be prosecuted for it.
VPNs are not prohibited per se, but mine is prohibited in the Netflix terms and conditions
According to the terms and conditions of Netflix: yes.
According to German law (presumably): no.