That's because the rising cost of borrowing is only one half of the story.

The main cause of the European Central Bank's tougher stance on rates has been the transformation of Germany's economic profile from sick man of Europe to awakening giant, reopening a huge market for Irish exports just as our domestic economy is catching its breath. Jean-Claude Trichet may be putting the clampers on, but German companies are ready to splash the cash . . . and it's proving a welcome tonic to some Irish firms.

"Germany has gone from recovery to boom and it's expected to last until 2012, " says Angela Byrne, Enterprise Ireland's manager for Germany. "Business sentiment underlines that companies are in better shape than ever . . .it's gone from spending freeze to spending frenzy."

While business climate and sentiment indicators continue to fluctuate, the overall trend shows Germany is doing better than it has in years and may have finally digested the costs of 1990's reunification with the previously communist east. The economy is growing by up to 1% per quarter in the last year after years of stagnation, mainly on the back of capital formation . . . a sign that businesses are gearing up (and have money) to spend.

That growth has even been hampered somewhat by cautious consumers who have been reluctant to spend much in the retail sector, as declining receipts in May showed. Yet those same consumers are the savings champions of Europe, having socked away 4 trillion.

The 2002 Hartz labour market reforms seem to be paying off too, as firms used the downturn to downsize, returning leaner and hungrier . . . and ready to hire again. Germany has lopped two million from its unemployment rolls since mid-2005 and is adding jobs now at a rate of 500,000 per quarter.

"Everybody has heard the bad news but the boom isn't getting coverage except as regards interest rates, " said Byrne. "The baton has passed to the export sector."

Some firms have picked it up and run already. Carlow-based Burnside Autocyl has been selling hydraulic cylinders to German off-road equipment manufacturers for two decades. Germany is Burnside's largest market, accounting for 30% of its 27m revenue, but it is growing faster than ever . . . and faster than any other market now.

"Business has followed the fortunes of the economy. We can see it in the size of our orders, " said Pat Byrne, Burnside managing director. "We're seeing quite a rapid increase in the numbers from Germany."

Byrne said the German market had been flat or declining . . . in some years as badly as 10% . . . until about a year ago.

Now Burnside's client's requirements are growing at 15%-20% a year.

"We've never seen that kind of growth in one single market it one year, " said Byrne. "From our research, it's going to stay growing like that until 2010."

Burnside's experience points to the robustness of German manufacturing and engineering . . . traditional strengths that are coming back refortified after a decade in the doldrums . . . and an area of opportunity for Irish suppliers.

Prodieco, a Dublin precision engineering firm that makes tools, dies and moulds for the pharmaceutical industry, has always been export-led, but moved into Germany only two years ago. It's already the company's second-biggest market, accounting for 20% of revenue.

"We attempted to enter the German market four years ago but weren't successful, " said chief executive David Barker. "But we've now targeted Germany to be our number one growth market. We put in a high-level office in April and we're already considering expanding. If we can build a reputation there, it's the best possible reference in other markets."

Market observers say the growth in German engineering is at levels not seen since the tail end of the Wirtschaftswunder in the 1960s. Ironically, the growth of India, China and other emerging markets is redounding to Germany's benefit as German firms are still the ones outfitting many of the world's factories.

But other sectors are rife with opportunity, too. Aideen Keenan, marketing officer with the German-Irish chamber of industry and commerce, said the favourable regulatory environment for green technology in Germany is attracting big Irish firms such as Airtricity and Bioverda which can't find the scale, maturity or "nurturing" they need at home.

The German green boom is reverberating through other Irish firms too.

Barclay Chemicals produces agrichemicals . . . a "relatively static market", according to sales director Martin Ryan. But the German crop sector, where Barclay is long-established, is more buoyant than it was three or four years ago, just like the economy in general, he said, as biofuel needs have ramped up.

"There is indeed a recovery and a massive confidence shift, " Martin said.

"It will increase prices, increase demand and lead to greater profitability."