From the horse's mouth: the German finance ministry on Greek internal devaluation

So, in case one has been wondering why the Greek government is busy
cutting wages and pensions, it is essentially driven by the need to
"devalue internally" (which really means making Greece much poorer).
Of course, the Greek government is carrying out the orders

http://www.bloomberg.com/news/2011-01-25/asmussen-says-greeks-need-wage-cuts-to-restore-competitiveness.html

It is quite interesting, that the German deputy finance minister
clearly admits that austerity cost-cutting is hardly enough to pull
Greece out of the crisis.
.