They pay up first.
Seeing German heads cut off by ISIS and Co. or anybody else out there would never do as it could lead an already nervous German citizenry into thinking that they might be part of the real world after all. And that could lead to dire consequences indeed.
The German government is sure to deny having paid any ransom here, of course. This is sound policy because not to have denied paying ransom to terrorists after having paid ransom to terrorists would only encourage these and other terrorists to take even more hostages, most likely hostages from other countries where ransom is not paid for hostages, and then kill these non-German hostages later once that ransom has not been paid.
Die zwei entführten Deutschen auf den Philippinen sind nach Berichten eines lokalen Radiosenders frei. Das von den Terroristen geforderte Lösegeld sei gezahlt worden.