I disagree with their use of “real exchange rate” when they actually mean the labour rate. But in any case, if a country is on the top of the graph that means that their labour rates increase relative to the EU average. If a country is on the right then they have exported more than the European average.
Ireland had good exports and big labour cost increases. Germany had good exports and big labour cost decreases. Italy has had the ignomy of being the worst exporter and the third highest increase in labour costs.