Divergence in the interests of Germany and Europe?

FT has this quote from German economist Hans Werner Sinn about how Germany managed to emerge from the problems related to re-unification and labour market rigidity in the nineties.

The demographic problem, the high costs in the new Länder [eastern Germany], are still there. But the problems of west Germany being too expensive, with wages too high, has been resolved . . . What helped was that other countries inflated away from Germany. That has contributed greatly to Germany’s success.

Werner Sinn also talks about how Germany benefited from the Eurozone crisis with German savings remaining in the country and boosting investment.

Capital markets have now understood that you can burn a lot of money in southern Europe. Germans’ savings, which previously drained to the south, often via the French banking system, now prefer to stay in the safe home haven, even if the rate of return is less. This has been the driving force behind Germany’s boom of the past two years. 

This German success has created problems elsewhere, especially among the peripheral economies. The single biggest challenge for these economies is to restore their external competitiveness. However, given the single currency, regaining competitiveness would require extended duration of inflation in Germany and deflation in periphery. This has to be coupled with fiscal loosening by both consumers and governments in Germany so as to provide demand for producers in the peripheral economies. Both look extremely difficult propositions.