Portugal, Spain, Italy and Greece are all in breach of 3% Maastricht crieria budget deficits and 60% national debt to GDP ratios. That is an issue currently shaking the Euro system and is being talked up as a major challenge to EU integrity - even if everyone else in the EU are also in breach of the 3% ceiling for budget deficit ratios. It is not far fetched to point to a North-South EU divide between the self-proclaimed prudent beer-swilling cold-hearted North and an imprudent impudent wine-savouring sunny South, between an iron north and a malleable south? 
Passing our Edinburgh statue to one of my great great grandfathers, The Duke of Wellington (Duke of Douro in Portugal), I was reminded in a Radio 4 discussion about the history of UK national debt, by historian Niall Ferguson that Wellington was nicknamed the Iron Duke not for his defence of Portugal or for victory at Waterloo, but for installing iron shutters on his windows at Apsley House that were regularly being stoned, almost daily, by the mob protesting about economic hardships and his opposition to the Great Reform Bill in 1831. Today the stones are being thrown for similar reasons in the so-called 'Club Med' countries, and the The Guards charging the mob, who were nicknamed the "Piccadilly Butchers", are in today's EU supposedly the Germans. 
FT's Lex looked at the Club Med countries as a group perhaps because they are currently each experiencing street protests, sometimes violent, against budget cuts imposed. some say at the behest especially of 'Iron' Germany, to make them and all other fiscal recalcitrants comply with Maastricht deficit rules, that Germany itself is marginally in breach of? Two centuries ago, to help balance its books, the French under King Joseph invaded Andalusia and began the long two and a half year long bloody siege of Cadiz! Let's not indulge economic equivalents, to traduce the idea of the EU as having kept the military peace in Europe, only to replace it with open economic-warfare. The EU runs a modest trade deficit with the rest of the world. If Germany persists in maintaining a substantial export surplus internally and externally to the EU, then it has to live with the fact that many of its EU fellow member states must run deficits and therefore Germany has to buy the deficit countries' bonds to fund the current account imbalances.
German politicians have particularly decried the profligacy of the Club Med states, no doubt mainly for domestic political consumption plus a little leverage at the loans negotiations. Athens politicians complain this is Berlin bullying and the mob and expert commentators agree. FT Lex says, "Amid a rash of strikes in Greece, Spain and Portugal, emotions are running high. Yes, Greece and the other big-spending Club Med countries must tighten their belts. They also need to increase their competitiveness. But to insist, as Berlin has done, that austerity is the only way out for these countries is both unrealistic and untrue. Germany must play a role too." I agree, except this is not yet the time for so-called 'belt tightening'. Much of the anciety is caused by the evidence of Greek sovereignty rating crisis hitting the Euro, example of tail wagging dog, or as Soros would say 'tails' given similar problems in Ireland, Portugal and Spain. 
Greece, Spain and Portugal, less so Italy, have been running large trade and current account deficits for many years. Italy, unlike the others, did not indulge in credit boom growth. In credit crunch terms, Italy has been the most prudent economy in the EU. The ECB has provided loans to support bank aid, abd as can be seen Germany and France have also received support.
Last year, these current account deficits summed to about €127bn, of which trade deficits were €100bn, half of which was due to trade within the eurozone. The 4 countries shrunk their deficits significantly in 2008 and 2009's recession. Germany, meanwhile, retained a large current account surplus of a $135bn (€120bn c/a), down from €200bn in 2007 – over half of which is from trade with EU partners. For decades Germany enjoyed export-led growth, while the rest of the EU supplied the demand for much of its exports - a synergy that continues.
Germany's advocacy of fiscal austerity may be merely political grandstanding or a genuine concern that market confidence is more important than economic realities - whichever? Even germany must know that if now the four Club Med countries deflate their way to shrinking their budget deficits to 3%/GDP ratios, this means a €135bn cut, or about 7% of German output - a huge slump in demand, including for imports -see data below. And, then what if everyone has to do the same in the EU? Economies and markets do not run on straight lines. Maastricht criteria are an equilibrium ideal and the Euro is a strong currency protection of sorts, but underneath that allowance has to be made for very different, countervailing, if complementary, economic structures and growth policies. The kicker in all this of course is that The Euro and its Maastricht Treaty conditions are being levered to make the case for political union.
We took a big step in that direction with the Lisbon Treaty. But, so far, the new voting dispensation, our new President, the various councils, and the European Parliament, are not on the battle-scene.
As lex concludes, "Germany would not be able to substitute with increased exports to other countries. The economy, which is already stalled and only currently propped up by exports, would go into reverse. Berlin would then face some tough choices... If only out of self interest, German opposition to a Greek bail-out plan is therefore likely to soften."
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