If you visit a page that is translated into de-formal, all translation units that are not translated into de-formal should show the text of the translation for de instead, if available. (https://meta.wikimedia.org/wiki/Abstract_Wikipedia/Licensing_discussion/de-formal as an example)
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The problem is not whether de is a fallback language for de-formal (yes, it is, defined in MediaWiki core), but whether Translate uses the fallback languages. T55789 is about implementing fallback to some very closely related languages.