AS soon as I saw Florian Von Donnersmarck's The Lives of Others in a small theatre in Santa Monica early in February, it was obvious why it had been voted European film of the year ahead of Pedro Almodovar's Volver and Ken Loach's The Wind That Shakes The Barley and I knew it would go on to beat Guillermo del Toro's Pan's Labyrinth for Best Foreign Language Picture Oscar.

It tells the story of a member of the notorious East Berlin Stasi secret police who is ordered to set up strict surveillance on the playwright lover of a celebrated actress who is involved with a high-ranking politician, but in the course of doing so he becomes disillusioned with his own life and begins covertly protecting the man he's supposed to destroy.

A deeply emotional drama, The Lives of Others stands out as one of the great movies of this or any other decade. Yet although it has gone on to gross over $13m, 33-year-old Von Donnersmarck - he comes from a long line of counts - seems genuinely surprised to be praised. "You must excuse me, " he says. "I've just read a piece in Sight and Sound which calls it rotten at the core and all the more dangerous for being good film-making."

The idea for the film - which he wrote in a cell in a Cistercian monastery near Vienna where his uncle is a monk - comes out of his childhood. Both his parents are from East Germany. Although they came over from there before the wall was built, they frequently returned. "My father worked with the Catholic church which never accepted the division of Germany, so the Bishop of Berlin covered both East and West Berlin and was always travelling to and fro. He was a really formal and imposing figure, and my father was a bit like that too, but whenever they met to talk about how they were going to organise a Catholic old people's home or whatever, he would put on loud rock music to cover up the conversation."

From the age of eight until the wall came down in 1989 when he was 16 - the period during which the movie takes place - Von Donnersmarck regularly visited the East with his parents. "I was very aware that the Stasi spied on almost everybody who did anything of any importance, and I understood the conflict between communism and more democratic forms of government because I had that kind of cold war going on at home. My father was a very liberal conservative but my mother was very active in a socialist student union which organised the 1968 revolts in Germany."

The germ of The Lives of Others comes from listening to songs by Wolf Biermann, a kind of Bob Dylan figure whose 'The Stasi Ballad' ironically speculated about weakening your enemy by talking to him like a friend. "Admit it, when you go home at night, from time to time you catch yourself whistling my tune, " Biermann sang. "I even think if some crook were to come and try to rob or kill me, you guys would protect me, although you think I am the enemy."

Sydney Pollack and Anthony Minghella are to film a remake of The Lives of Others set in contemporary America. "The idea is to show that what happened in East German is not only a matter of history, but something that is going on at the moment, " says Von Donnersmarck. "I think it's shameful what is happening in the US.

People from all over the world went to America because they wanted to escape from authoritarian control. Now Americans are giving all that up under the Patriot Act.

"When a government is given too much power the first thing it will do is to start spying on its citizens. I don't think Americans should be focusing their protests against the Iraq war. The problem is really what they're accepting inside their own country."