Only the hard coded text parts would appear in German. Some text, such as the post footers etc, can be configured freely via the theme options and would still be in English until you changed them through the Theme Options. If the "Leave a Reply" above the comment form is German then it's working.
The language does not need to be enabled. If your WP installation is in German, and there is a de_DE.mo file inside /wp-content/themes/atahualpa3/ then the theme should switch the language automatically.
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