Cannot type any special character or umlaut in terminal

I was having a similar problem when connecting via ssh to Mac OS X using a terminal emulator. Although I'd set LANG to de_DE.UTF-8 I couldn't type in any characters with umlauts.

The fix I found was to create/edit ~/.inputrc (or edit the following lines in /etc/inputrc):

set input-meta on
set output-meta on
set convert-meta off

Now I can type umlauts. I believe this applies to xterms in general.

Set the right locales with

sudo dpkg-reconfigure locales

There you would select de_DE.UTF-8 as your setting. That solves all problems ;)

Info: Changing the value for set convert-meta off in /etc/inputrc is not completely working:
It fixed this kind of too, but there is still something odd: if I type ö I get an ö, but there seems to be a hidden character in front of the ö: I can delete wich Backspace two characters although I only typed one ö