Irish & German Economic Links in Perspective: A Fruitful and Dynamic Bilateral Relationship

Abstract

This study outlines the development of the economic relationship between Ireland and Germany in the last decade, examining the details of a robust partnership through international trade and investment data, a general macroeconomic analysis and a review of relevant press themes.

Macroeconomic aspects

The intensification of Ireland and Germany's bilateral economic integration has been marked by a thriving Irish export economy and a stagnant, yet still robust, German economy. Following Brexit, Irish exports to Germany flourished in the pharmaceutical and chemical sectors, potentially reflecting a deeper intra-EU integration as consequence. In addition, the Irish economy has shown a steady growth rate in real GDP and relatively mild growth of modified gross national income (GNI*), despite the COVID-19 pandemic.

Macroeconomic data elicit a constant trade surplus for Ireland in the last decade, growing sixfold from 2018 to 2023. This indicates that the demand for Ireland's products and services has risen considerably. A fundamental regional driver of this intensification of trade and investment is the federal state (Bundesland) Baden-Württemberg, which imports more than three times the value of Irish goods and services (such as pharmaceuticals, automotive parts, and electronic components) than its regional neighbours. The leading Irish export sectors are consumption and intermediate goods, while capital goods, such as machinery, show a stronger dominance on the German side, explaining a minor Irish deficit in this category since 2013.

With regards to the labour market, both countries portray stable figures and relatively low unemployment rates. In terms of Foreign Direct Investment (FDI), 2017 marked the beginning of a considerable rise of German investments in Ireland, while the investment flows from Ireland to Germany, though robust, have fluctuated slightly. However, when looking into the number of Irish companies in Germany, the year 2017 also marks the beginning of a rapid increase of companies and new employment.

Irish-German deals and the intensification of a long-term partnership

This long-standing partnership includes the establishment of new ventures that showcase a bilateral success story of integration within the European Union. This is exemplified by Merck's approximate €450 million investments in further infrastructure in Ireland until 2027 as well as the multi-million-euro investment in 2022 of the Warsteiner brewery in the Irish craft brewery Rye River. Similarly, Hamburg based company Capital Surge have invested around €140 million to establish 20 solar parks in Ireland.

Thematic analysis of Irish and German media from 2016 to January 2024 revealed key discussions on relationships, trade, and investments between the two countries. The economic relationship between Ireland and Germany has demonstrated that both countries benefitted from strong ties with one another. Looking ahead, the future perspectives for this relationship appear promising, as both nations continue to seek opportunities for further cooperation, as exemplified by the energy sector, especially in the field of renewables.