“DON’T mention the war” is the catchphrase from one of the best-loved scenes in “Fawlty Towers”, a British television comedy series. John Cleese plays the eccentric owner of a small-town hotel who causes uproar by incessantly and rudely talking about the war to his German guests. These days in Brussels the equivalent catchphrase about Germans has been “Don’t mention the surplus”. It would be funny were it not for the hardship that Germany’s obsession with competitiveness is causing.

For Germany booming exports are the measure of economic virility. To an extent, it has a point. The woes of the euro zone were, in large part, caused by southern Europe’s loss of export competitiveness. Yet a large and persistent surplus in the trade balance (or the current-account balance, which includes foreign income) can be the symptom of a distorted economy. If big surpluses were a guarantee of vitality, then Japan would never have suffered its lost decades.

Within the euro zone troubled economies cannot devalue to regain competitiveness or loosen monetary policy to suit their needs. Instead they must adjust by painfully reducing wages and prices relative to those of others. Such “internal devaluation” can be done gradually, by holding down wages, as Germany did before the crisis; these days, though, it is accompanied by wage cuts and deep recessions. By contrast surplus countries, including Germany, the Netherlands and Austria, enjoy an artificially low exchange rate. Were Germany still using the Deutschmark, its currency would surely appreciate.

Many urge Germany to stimulate its economy to help its crisis-hit partners. On October 30th America’s Treasury Department criticised Germany’s export-led growth model, in unusually sharp language, as a reason for the weakness of the euro zone’s recovery. But in an open trading area the connection between one country’s surplus and another’s deficit is complex. Boosting demand in Germany may suck imports from America, China or eastern Europe, more than from the Mediterranean. Even so, say Eurocrats, that would help indirectly. Buying more imports could help arrest the rise of the euro, which is making it harder for southern countries to rebalance their economies.

The euro zone’s toughened rules of “economic governance” are lopsided. Under the so-called macroeconomic imbalances procedure, a current-account deficit greater than 4% of GDP can trigger an alert, possibly followed by “in-depth analysis” carried out by the European Commission, policy recommendations and, ultimately, the threat of sanctions. Yet a country’s surplus must rise above 6% of GDP before Eurocrats start to take notice. Germany was let off last year because its surplus (averaged over three years) was a shade below the warning threshold and was expected to shrink. Now statisticians have revised that figure to 6.1%, and it has grown since then. It stood at 7% in 2012.

So will the EU dare to mention the surplus? The test will come later this month, when the commission issues its latest economic forecasts and launches the “European semester”, an annual cycle of economic and budgetary assessments that culminate in the spring with “country-specific recommendations”. These edicts from Brussels have already irritated France, which told the commission not to “dictate” reforms. But given France’s slow progress in pension and labour reforms, more criticism is inevitable. Now that America’s Treasury has blazed a trail, can the commission afford not to speak out if it wants to be seen as independent?

Germany says its workers’ wages have risen of late, and that its growth is fuelled more by domestic demand. Crisis countries are adjusting, too, and growth is returning to the euro zone. But the euro zone remains a faulty edifice. The recovery is fragile, and the burden of adjustment still falls on debtor states. Take Ireland: its current account may be back in surplus, and it hopes for full market-access next year after its bail-out expires. But one of its biggest exports is young graduates. Youth unemployment in the Mediterranean rim also remains appallingly high.

In its latest World Economic Outlook report, the IMF says the shrinking current-account deficits in crisis-hit countries have mostly been caused by “cyclical” factors, ie, recession and a slump in imports. Internal devaluation still has a long way to go. The message to Germany is clear: increasing its domestic demand is critical to helping weaker states recover.

Such appeals grate in Berlin. Germany does not just trade within the euro area, say officials, but in a competitive world. Southern Europe should not seek to recover by weakening the strong. Indeed, Germany still thinks the southerners are not doing enough. It wants to introduce reform “contracts” between governments and the commission, lubricated with extra money. The idea is stuck. Debtor states want to talk mostly about the size of transfers; creditor states focus on the binding nature of commitments. German officials claim, scornfully, that just 10% of the commission’s country-specific proposals have been enacted.

In Europe’s service

The accusation could rebound on Germany. The commission may have kept quiet so far about Germany’s surplus. But Eurocrats say Germany has done little to implement even the few recommendations it was given, such as liberalising construction and services. It could also do more to invest in education and infrastructure, and make child care available for working women.

Germany should be leading the push to liberalise services across the EU. Services make up the vast bulk of the EU’s GDP, but are often poorly integrated into the single market. Everybody would win. Opening up services would boost demand in Germany, enhance competitiveness in southern Europe—and even give Britain a good reason to stay in the EU.

Economist.com/blogs/charlemagne