Germany deviates from the European norm by having products on offer that are globally competitive. What a crime. Let's make Europe more stable by turning every country into Greece!
Competitiveness is a matter not just of value, but also of price, which is largely a matter of how much you pay your employees. Germany achieves its competitiveness by paying employees badly. That is a not a virtue, it's a vice.
That's the key here, and again I encourage you to read and contemplate the post that I linked to, since it clarifies the issue.
Krugman's article like everything he writes is not insightful. Wages are no per-se too high or too low, but rather relative to wage levels of competitors and desirability of produced goods. Germany competes in a global market and in that global market Germany is a high-wage country. When it had higher averages wages, Germany lost its competitive edge.
Here are more interesting questions: which are the average wages paid in Greece appropriate for the product Greece seeks to sell? Which products from Greece do you buy on a regular basis? Greek smartphones? Greek cars? Greek chemical products?
Please, actually read the article. The numbers in the last diagram are relative unit labor costs. In other words, they are labor costs divided by the (market) value of the produced goods. This division incorporates everything you claim to be missing, which is why I feel confident in the claim that you either haven't read or haven't understood the article.
Krugman claims "Germany, [...] has had much too little wage growth" and offers no argument whatsoever to support this claim. It's pure stipulation!
Indeed, if he were to take his own figures seriously, he would have to argue that e.g. Portugal too does not have enough wage growth vis-a-vis Greece and Italy. But he keeps bashing Germany, as Krugman always does.
Anyway, why should relative unit labour cost be the only relevant measure? Other factors are also important, for example the cost of capital. The more advanced an economy is, the more important cost of capital. Since Greece does not produce capital intensive goods, it should have higher relative unit labor costs. Krugman should know these things ...
That's the key here, and again I encourage you to read and contemplate the post that I linked to, since it clarifies the issue.