>But you could make the same argument against any US state that remains cost competitive due to the currency.

Indeed you can.

>And it also discounts the fact that Germany did very well during the period when it did have it's own currency.

This is true. However Germany also gets decent manufacturing benefits from the income disparity in the east.

>As it is, German economic performance does have an effect on the Euro, being the largest member state.

Of course. However, about half of Germany's exports are to Eurozone, for which EUR flucations have no effect.