Europe's manufacturing numbers just revealed the continent's biggest problem - Germany

Europe is supposed to be one grand single market block, taking on the US in the global economy.

But the latest manufacturing figures from across the continent, released on Tuesday, show just how far from the truth this is.

German manufacturing is at a 16-month high, while almost every other nation bar Greece is at some sort of low, as the table below shows.

Greece is only rebounding because it's come off such a low base and is still shrinking rapidly.

Markit's PMI reading gives a number to indicate the health of the manufacturing sector in each country, with anything above 50 signalling growth and anything below showing contraction.

The range for August is huge - from 39.1 (Greece) to 53.8 (Italy). Clearly, Europe is not one big unit.

Part of this is of course because of the exceptional circumstances in Greece, where GDP is rapidly shrinking amid its debt crisis. But France is also doing terribly - it had below-forecast PMI of 48.3, signalling shrinking.

There are two big issues: first, there's no fiscal union to address underperforming areas; and secondly, countries that are in need are at the mercy of Germany.

First, the fiscal union. The US is a big place and different areas of the country are bound to perform differently. Even in the UK this is the case, with a north/south divide.

But in these countries the central government can redirect resources to the areas where growth is stalling to try and bring the economy back on an even keel. In the UK the government is investing in creating a "Northern Powerhouse," George Osborne's favourite buzz-word phrase of the moment.

But Europe can't - or won't - do that. If a country is struggling, Europe is unlikely to lend it a hand to encourage growth, as the recent experience with Greece shows. Politically, it can be toxic to be seen to be handing free cash to other countries.

Second, there's Germany. Spain's manufacturing growth in August was in line at 53.2, a 10-month low. But Germany's powerful finance minister Wolfgang Schaeuble said on Tuesday: "Spain is the best example that we've done a lot of things quite right in Europe."

Many Spanish would surely disagree.

Like Greece, Spain was forced to swallow huge austerity measures in the wake of its 2008 economic crisis, brought on by the credit crunch. Spanish unemployment hit 27.2% in 2013 and its economy is only just now starting to limp back to growth. The country's budget deficit is set to be less than 3% of GDP next year, down from its crisis peak of 10%.

This is clearly Germany's favoured method for dealing with weak Eurozone countries in need of help - force them to shoulder the cost of the recovery themselves, no matter what the human cost may be.

We've seen this with Spain, Portugal, Italy, Ireland, and Greece.

Of course the IMF and other EU members are involved in these talks but Germany is the most ardent cheerleader for austerity and the least willing the budge in many cases.

Austerity elsewhere is good for Germany - they don't have to pay more than they are willing and the weakness of members states lowers the euro, which in turn artificially lowers the cost of Germany's exports and boosts its economy. Former US Federal Reserve chair Ben Bernanke made this point on his blog recently.

Connor Campbell, an analyst at SpreadEx, told Business Insider: "It speaks volumes that whilst Germany hit a 16-month high with its manufacturing PMI, the rest of the Eurozone was varying shades of dismal, from an 18-month nadir for Ireland to a 4-month low for France."

Germany has a lot of weight in Europe and, along with its Eurozone partners, it can force economic reforms on weak countries like Greece and Spain.

But what about France? Schaeuble and Merkel can't force Francois Hollande to pass laws cutting government spending and improving productivity. France is too big a player.

And if France doesn't do this, its manufacturing sector will only get worse. If it's less productive than other nations, goods for export will be more expensive.

If this happened in the UK, the currency could be devalued to make our products more competitively priced abroad.

But France can't do that with the euro, so exports remain expensive, exacerbating the problem.

Unless a fiscal union is established, where money can be deployed freely across the continent to where it is needed, Europe is facing a huge paradox.

Germany wants the rest of Europe to adopt the "German way" of running their economies - efficient, spend-thrift, sensible. Many other countries don't want to and Germany can't force them.

But the stubbornness of nations like France to resist this, coupled with their membership of the euro, means that one day Germany might be able to.

That's because the way the eurozone is set up right now means any economic problems faced by a nation are likely to get worse before they get better. There isn't a mechanism to address systematic weaknesses in a country's economy and there's a lack of political will to use such a mechanism even if it did exist.

Campbell says: "Whilst the Eurozone may be ostensibly out of the woods for now in regards to a Grexit (or it will be dependent on the result of the impending election) these figures [manufacturing PMI] once again point to the fundamental flaws lurking beneath the surface of the monetary union."

Europe could trundle along disjointedly as it is now. But what seems more likely is there'll be another "crisis" in a member state and Germany will be ready to push tough reforms on whoever it is.

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