The names of ships were decided by the Commander-In-Chief of the Kriegsmarine. Due to the inherent political nature of the naming of major warships approval would be sought from Hitler beforehand. For virtually all German warships of World War 2 this meant their names were decided by Erich Raeder.

Prior to the First World War, Raeder had worked in the Public Relations section of the Naval High Command which brought him into close contact with Tirpitz. Later, he would serve as Chief-of-Staff to Hipper through most of the war, including at the battles of Dogger Bank and Jutland. He became Commander-in-Chief of the Reichsmarine in October 1928. His style as CinC was noted as being extremely authoritarian; any officers who disagreed with views were forcibly retired; and also staunchly traditionalist. Raeder deliberately harkened back to the Kaiserliche Marine, its officers and its traditions during the rebuilding of the German Fleet. This was especially evident in the naming of the warships of the fleet:

· Admiral Scheer, Graf Spee and Admiral Hipper were named after three of the most prominent and successful admirals of the First World War

· Scharnhorst and Gneisenau were named for the armoured cruisers that gained famed at the Battles of the Coronel Islands and the Falklands

· Tirpitz was the father of the Imperial German Navy. Raeder was a protégé of Tirpitz and would staunchly defend his reputation as being necessary to maintain the prestige of the navy. Raeder would intervene to prevent the publication of books critical of Tirpitz and as one of the authors of the official history of Naval operation in the First World War, Raeder would glorify Tirpitz.

· Blucher, Seydlitz and Lutzow were famed First World War cruisers.

· The light cruisers promulgated names of WWI ships (Emden et al.)

That's not to say that there wasn't any politically motivated names:

· Deutschland was the first major warship completed after the enforced building holiday and the first major new unit of the Reichsmarine - she was launched by Reichs President Hindenburg

· Bismarck - the battleship Bismarck was launched by Hitler who declared in his christening speech that Bismarck had created an empire despite being opposed by (amongst others) liberals and democrats, Marxism and Reichstag parties.

· Prinz Eugen was originally intended to be named Tegethoff, but this was changed to prevent friction with the Italians. Prinz Eugen was launched shortly after the anchluss with Austria and the name reflected the former Austro-Hungarian battleship of the same name. The ships heraldry also maintained the Austrian connection. She was launched by the wife of Hungarian Regent Miklos Horthy, who was also present at ceremony and had been the last commander-in-chief of the Austro-Hungarian navy (and commanded the former SMS Prinz Eugen for a period).

The reversion to alphanumeric designations for destroyers instead of names was done for security reasons after the outbreak of the war - the unnamed ships were all launched after September 1939. Previously the cap tallies of the crew had the ships name, but this was replaced a generic one saying "Kriegsmarine" instead.

The name change for Lutzow is usually attributed to Hitler not wanting to risk a ship carrying the name Deutschland being sunk and used for propaganda purposed. Instead, the name was changed on the advice of Raeder, partially for the above stated reason and partially to cover up the sale of the heavy cruiser Lutzow to the Soviet Union and conceal the removal of German heavy units from the North Atlantic in late 1939.

Sources:

Marine-Arsenal Special Band 5: Der Z-Plan - Siegfried Breyer

Pocket Battlehsips of the Deutschland Class - Gerhard Koopand Klaus-Peter Schmolke

German Destroyers 1939-1945 - Gordon Williamson

Hitler, Bismarck and History - Herbert D. Andrews German Studies Review, Vol. 14, No. 3 (Oct., 1991)

The German Navy in the Nazi Era - Charles Thomas

Fighting the Great War at Sea - Norman Friedman