Bernhard Schlink is best known for his 1995 novel The Reader, which has become a classic of Holocaust literature. It tells the story of a 15-year-old boy, living in postwar Germany, who falls into a passionate love affair with an older woman. Later he discovers that his former lover was a guard in a Nazi concentration camp.

Since then, Schlink has published two short story collections and a series of novels: some literary fiction and some crime. Like The Reader, most of these books explore the difficulties of trying to lay the past to rest. This new novel returns again to themes of memory, trauma and the impossibility of reconciliation. However, this time his subject is German reunification and the legacy of the German Democratic Republic.

The story begins when Kaspar, an elderly bookseller living in modern Berlin, finds his wife, Birgit, dead in the bath. Her death is not suicide, but Kaspar is aware of the part that alcohol played in her death – and her life. Filled by a “weary anger”, he acknowledges the fact that Birgit was always a person of concealment, caution, reserve. Searching through her emails and notebooks, he is taken back into their shared past.

Remembering how he arrived in Berlin as a young man in 1964, he recollects his hunger to see the “whole Germany” and “to find not differences but things in common”. When he crossed to the East for a day, he was considered “a class enemy”, but still he met Birgit and fell in love. Together they formed a plan for her to cross the border into West Berlin. Their plan succeeded but, like Orpheus, Kaspar knew that he must never look back.

Schlink knows how to tell a gripping yarn – this novel certainly succeeds at the level of narrative

Now he begins to understand his wife as a woman forever in flight. He also discovers that she left a baby behind in East Berlin. Birgit was always haunted by the loss of this baby, but her notebooks reveal her bitter admission that she was “not a person capable of searching, not of finding, not of writing”. Kaspar decides that he must now try to undertake the search that Birgit could not attempt.

His quest takes him to a rural neo-Nazi settlement in the former East Germany and a stepgranddaughter, Sigrun, who is an enthusiastic adherent of far-right ideologies. As Kaspar attempts to “save” Sigrun, he is forced to confront his own prejudices, plus the tragedies, contradictions and complexities of German reunification. In that process, many were winners. But what has become of the losers?

Birgit and others like her struggled with the need to be endlessly grateful for all that West Germany was giving them. She never mourned the GDR itself, but she certainly yearned for that exciting and idealistic time when East Germans passionately wanted to be part of “the new, good era” and create “a new country for new people”. Soon not only the dream but the country itself was gone. “Those who left can never return; our exile never ends.”

As a writer who has published crime fiction, Schlink knows how to tell a gripping yarn, and this novel certainly succeeds at the level of narrative. The events portrayed are satisfyingly surprising and he convincingly illuminates the turbulent history of his country, plus the way a tiny minority cling to the ideas of national socialism. He is also admirably willing to leave questions unresolved, characters unhealed.

However, the great success of The Reader arose from the fact that, while telling a strong story, it was also lyrical, vivid and atmospheric. Regrettably, in The Granddaughter an excess of plot submerges place and character. The dialogue is sometimes contrived, the language less than fresh. Key scenes feel rushed and underdeveloped. The character of Sigrun is intriguing but not always credible.

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Nevertheless, this is a rewarding and wonderfully readable novel. It is refreshing that even the far-right characters are not wholly without redeeming features. Schlink remains a perceptive chronicler of modern Germany.

The Granddaughter by Bernhard Schlink, translated by Charlotte Collins, is published by W&N (£20). To support the Guardian and Observer, order your copy at guardianbookshop.com. Delivery charges may apply.