Has the eurozone crisis ended? Many politicians in Europe, including France's president François Hollande, seem to think so. Well, not so fast. Far from ending, the crisis is yet to reach its most difficult phase.

It is easy to see why politicians claim the crisis is over. Greece has just been promised another €50bn, provided it accepts still more austerity, deregulation and privatisation. Elsewhere in the periphery, Ireland is in its sixth year of recession, Portugal is heading for major economic contraction, and Spain is going from bad to worse – but their governments are imposing austerity, and people appear to be putting up with it. Even core countries, including Italy and France, have accepted the need for balanced budgets. Across the eurozone, there is no effective opposition to the mantra of austerity emanating from Berlin.

The financial markets, meanwhile, have been placid since September when Mario Draghi, chairman of the European Central Bank, announced that he would buy the debt of countries in difficulties provided they accepted bailout conditions. The spreads on Italian and Spanish debt have tumbled by 250 basis points. The official launch of the European Stability Mechanism has also helped, since the ESM is fortified with €500bn. The calculation of bond markets is transparent: for the moment it is not profitable to borrow money to speculate against the debt of weaker European countries.

But austerity and calmer financial markets do not amount to ending the crisis. Rather, they point to the emergence of a German eurozone. Commentators who have protested that crisis leadership in the eurozone has been weak have been wide of the mark. In practice, austerity is transforming the periphery into a vast East Germany: a zone of weak growth, low wages, poverty and no economic dynamism. There will not even be some of the fiscal transfers, amounting to perhaps €60bn annually, that have supported East Germany.

Equally wide of the mark have been those who stress the importance of an overarching state in charge of fiscal policy, or of a banking union to lessen the risks of banking collapse in the eurozone. Germany will not accept either a fiscal union or a banking union that would use its taxpayers' money to subsidise others in the eurozone. These debates have merely distracted attention from Germany's determination to impose rigid fiscal discipline on "delinquents" and to monitor only the biggest banks in the eurozone, leaving smaller German banks out of the net.

But the most telling piece of evidence of the emergence of a German eurozone has been the reluctance to confront the deeper cause of the crisis, namely the divergence in competitiveness between – mostly – Germany and the rest. German gains in competitiveness have not been due to greater efficiency, but are a result of the fact that Germany has systematically undershot the eurozone inflation target, while other countries have either hit, or overshot it thanks to the wage restraint imposed on its workers, harsher than elsewhere. Over the years a great gap has emerged between Germany and the rest, especially the periphery, whose competitiveness has collapsed.

The benefit to Germany has been sustained current account surpluses, the true aim of wage restraint. By the same token, the periphery has accumulated deficits and debts. Austerity is now forcing a brutal correction of these imbalances – by crushing peripheral wages. Yet, the cure cannot be effective since German wages have not been rising strongly.

The solution would be for Germany to rebalance its economy by strengthening domestic demand. Instead, Berlin's reliance on exports has grown: in 2012 the contribution of its domestic economy to growth will be zero. The eurozone is becoming a vehicle for German mercantilism, whereby the German people are first beggared in order subsequently to beggar others.

This situation is manifestly untenable. It brings unemployment, destroys productive capacity and spreads hopelessness across Europe. In Greece conditions went beyond absurd long ago. As the eurozone moves deeper into recession in 2013, social and economic tensions will ratchet up across the continent. The most difficult phase of the crisis is still ahead of us.