Ireland’s economic leprechaun is running amok in Europe – The Irish Times

Ireland’s economic leprechaun has grown too big for these shores and is now running amok in Europe.

Despite accounting for less than 5 per cent of the euro zone economy, Ireland and its bulging GDP (gross domestic product) metrics are determining whether Europe is growing or stagnating. Or at least shaping the perception.

A 12.1 per cent decline in Irish GDP in the first quarter of this year – triggered by a slump in multinational exports – tipped the euro zone into an unexpected contraction.

In the second quarter, Irish GDP yo-yoed back up, jumping 10 per cent, triggering a better-than-expected 0.6 per cent increase in euro zone GDP, a growth rate that eclipsed the AI-charged US economy.

A further 5.5 per cent expansion in Irish GDP in the third quarter drove euro zone growth to 0.4 per cent, above the anticipated 0.2 per cent.

Eurostat now publishes Ireland’s numbers not with one asterisk but two, to highlight the volatility of the Irish data.

European Central Bank (ECB) officials are increasingly using euro zone growth figures that exclude Ireland.

There’s a strong case to be made for removing Irish GDP from the bloc’s statistics altogether. They’re skewing the headline numbers.

It’s not only the inherent volatility of Irish GDP but the fact that it encompasses business activity carried out in other parts of the world, otherwise known as “contract manufacturing”.

The latter occurs when a third party (typically in a lower-cost jurisdiction) manufactures products on behalf of the domestic company. Because national accounting rules track when goods change ownership rather than when they cross borders, this activity is recorded in our export data.

According to one estimate, contract manufacturing accounts for about a third of Irish GDP. Apple getting third-party operators in China to produce iPhones accounts for a big component.

Hence the bulge in Irish GDP is a total distortion for both Ireland and Europe.

It’s all well and good discounting headline GDP numbers here in favour of bespoke measures such as GNI* (gross national income), but Eurostat requires a standardised metric to evaluate the performance of Europe’s economy, and anything other than GDP gets too messy.

The term leprechaun economics was first coined by US economist Paul Krugman when he applied it to a surge in GDP here in 2015. That year Irish GDP jumped by 26 per cent in one quarter, a rise that was later revised upwards to more than 30 per cent.

The relocation of intellectual property assets to Ireland by big multinationals – including Apple – was the main reason. The knock-on impact of this relocation has been a surge in corporate tax receipts.

In 2014, the State’s corporate tax haul was €4.6 billion. Last year it was just under €35 billion. The Department of Finance predicts it will climb to nearly €45 billion by the end of the decade.

For the past 15 years, Ireland has been smeared as a tax haven, accused of facilitating wholesale corporate tax avoidance. The GDP distortions and turbocharged tax receipts only reinforce the smear.

In reality, it is the new era of monopoly capitalism and the porous US tax system that has landed Ireland in this position.

Apple records higher annual revenue than the GDP of developed nations such as New Zealand, Finland and Portugal, meaning the country that houses its non-US headquarters (Ireland) will inevitably encounter data distortions.

A question remains as to whether the iPhone maker’s tax strategies – and those of its tech peers – were done with the tacit approval of US authorities, which may have been happy to see its brightest corporate stars prosper.

Talk of onshoring these operations and their profits by President Donald Trump and other US leaders comes and goes without much change.

We spent the whole of 2025 fretting about the impact of Trump’s tariffs on Ireland’s investment model.

That was until the IDA’s end-of-year figures told us that, despite all the turbulence, 2025 was a record year for inward investment.

The tech bros queued to bend the knee in Trump’s court. Big pharma bosses made pricing deals to avoid tariffs. From Ireland’s perspective, they were merely paying lip service to Trump’s Maga agenda.

Europe’s headline growth numbers are being parsed by analysts to see the impact of inflation; to see if Germany is finally emerging from a three-year slump; to see if France can grow its way through the current turmoil; but there’s a smudge in the viewfinder, a smudge called Ireland.