FICTION: ANNA CAREYreviews All That I AmBy Anna Funder Penguin Viking, 321pp. £18.99

SOMETHING STRANGE and tragic happened to German intellectual life in the 1930s. It left the country. As Nazism took hold, Germany's greatest literary and intellectual figures gradually fled their homeland, and a new genre was born: Exilliteratur, the literature of exile. From London to Lisbon, from Amsterdam to California, German writers and political activists continued to write and campaign, many seeing themselves as custodians of "the other Germany", the country of Heine and Goethe rather than brownshirts and barbarism.

Anna Funder's superb debut novel tells the story of some of those exiles. Funder is no stranger to the darker side of 20th-century Germany: her award-winning first book, Stasiland, was a fascinating account of life in the GDR. At times that book read like a novel, and All That I Amshows that Funder hasn't lost her ability to turn facts into an engaging narrative.

As a young student, Funder met an elderly German woman called Ruth, who became a close friend and who told the younger woman about her extraordinary experiences as a young Jewish anti-Nazi activist in both Germany and London. Now Funder has adapted the story of Ruth and her friends, and turned it into a powerful work of fiction.

The story is told in turn by a fictionalised version of Ruth, now a frail old woman living in an Australian suburb, and Ernst Toller, the German playwright and political activist, who is revising his memoirs in a New York hotel room in 1939. From their different vantage points, both Ruth and Toller look back at their lives. Ruth’s ageing brain throws up long-muffled memories, while Toller attempts to capture the truth of his own life and that of his friends by writing everything down. In many ways, this is a book about memory, and its ability to revive the dead and keep them safe and present.

Both Ruth and Toller are full of memories of Dora Fabian, Ruth’s cousin and Toller’s friend and lover. After the Reichstag fire of 1933 enabled Hitler to assume total power over his opponents, Dora, Ruth and Toller were forced to flee Germany forever, along with Ruth’s husband, the satirical journalist Hans Wesemann. They escaped to London, where they were given visas on condition that they refrained from all political activism. But they continued to work in secret to bring the truth about Nazi Germany to the outside world, aware that the discovery of their activities would mean instant deportation.

But being sent back to Germany by the British was not the only danger. Throughout the 1930s Nazi agents all over Europe targeted exiled enemies of the regime, kidnapping them back to Berlin or killing them on the spot. “The greatest assets the Nazi agents have is that no one, neither police nor one’s friends, will believe that anyone can do the things here that we have proof that we do,” the real-life Dora told a friend in London at the time.

The exiles could trust no one, from casual callers to supposed comrades. But when betrayal came, it was still a shock.

Curiously, All That I Amisn't the only book published this year by an Australian writer about anti-Nazi German intellectuals in exile. Evelyn Juers's nonfiction work House of Exiledealt with the experiences of Heinrich Mann and his friends. Juers's flights of fancy felt self-indulgent and jarring, however; Funder's straightforward fictionalisation of a true story is much more powerful. She brilliantly re-creates the unstable world in which her characters live, highlighting contemporary international apathy about Nazi terror.

Though the narrative voices of Ruth and Toller are at times a little too similar, the characters come to vivid life as the story progresses: witty, insecure Hans; quietly determined Ruth; tormented Toller; and brave, brilliant Dora, whose determination never to betray her principles is always stronger than her fear of death.

This is all helped by the fact that Funder writes beautifully, with an understated lyricism that never gets in the way of the gripping story. Deeply moving and highly readable, All That I Amis a tender and worthy tribute to the brave old woman who inspired it.

Anna Carey is a freelance journalist. Her debut novel for young adults, The Real Rebecca, was published this year by the O'Brien Press