Nonsense! The embedded privileges of the PPL(A) may continue to be exercised with a Class 2 medical certificate.
This is definitely not the case. There is no such thing like an "embedded PPL". If you hold an ATPL you are entitled to conduct private flights but that doesn't mean you have an "embedded PPL". JAR-FCL 1.270 states unambiguously:
"In order to exercise the privileges of the ATPL(A) a valid Class 1 medical certificate shall be held."
I personally know a fellow CPL pilot in Germany who is by chance also a lawyer. He used to think the same way like you do, let his class 1 lapse and continued flying privately. He was sued by the German LBA, went to court and lost his case. I can only warn everyone: don't fly without an appropriate medical!