The Irish Independent reports that consumers suffered a double blow yesterday when interest rates rose by a quarter of a per cent and new figures showed prices of goods and services are continuing to soar.

The Irish Independent also reports that the Quinn Group is to sell its 13pc stake in Airtricity at a 94pc profit rather than take up its rights in a €250m fund-raising by Ireland's largest wind-energy group.

The Irish Times reports that Aer Lingus management has indicated a willingness to set aside more than €100 million of the proceeds from the airline's proposed flotation in a special fund to offset any deficit in its staff pension scheme.

The plan is designed to win staff support for the privatisation of the State-owned company, which is being prepared for a stock market listing near the end of September.

In an effort to create a secure foundation for stable industrial relations after an initial public offering and to reassure potential investors, the plan includes a wide range of commitments on pay, conditions and a claim for compensation in respect of changes in work practice conceded under the airline's 2004 business plan.

Siptu's opposition to privatisation has emerged as a big barrier to the privatisation process, which is already vulnerable to the threats posed by the spike in fuel prices and stock market jitters over the rise in interest rates.

The union's stance in the coming weeks on the latest proposals from the airline's management will be crucial because the Government has indicated that its ultimate approval for the flotation process will be dependent on staff support.

It was unclear last night whether Siptu would be prepared to change its position on the strength of the proposal, which emerged this week.

The airline promised in May to provide some €70 million for a special pension fund, but it moved in recent days to increase that commitment by more than €30 million.

The fund would be drawn down in the event of a deficit in the existing pension scheme. Staff at the Dublin Airport Authority and the aircraft maintenance firm SR Technics also subscribe to the scheme, but they would not be entitled to support from the fund proposed by Aer Lingus.

In return for the commitment to set up the fund, staff will be asked to increase their pension contributions by 2-2.5 per cent. The company would increase its pension contributions by a similar amount.

The airline had agreed last month that no action should be taken to reduce the pay and conditions of staff who are employed immediately before the date of the flotation.

This point is reiterated in the latest proposal, which also includes a commitment to establish a profit-sharing scheme for all workers.

The purpose of such a scheme would be to allow staff to buy additional shares and retain their 14.9 per cent shareholding in the airline when new shares are issued as part of the flotation. In its absence, staff could see their stake diluted.

The Irish Times also reports that the chief executive of DCC, Jim Flavin, received a special bonus of €150,000 "in recognition of the exceptional demands" placed on him during the year "arising from the successful defence of the action taken by Fyffes against DCC", according to DCC's annual report.

It was part of a total remuneration package of €1.625 million in respect of the year to end March 2006. This represented an increase of €320,000 on the previous year.

Fyffes took an unsuccessful civil case against Mr Flavin, DCC and two subsidiaries, alleging insider trading. The ruling is being appealed to the Supreme Court.

DCC chief financial officer Fergal O'Dwyer also received a special bonus to compensate for the demands made on him arising from the case. He received €100,000.

Mr Flavin's remuneration package comprised a salary of €806,000, a performance-related bonus of €510,000, the special bonus of €150,000, benefits of €38,000 and a pension contribution of €121,000. The maximum performance bonus possible under the remuneration rules for the year was 65 per cent of salary. Mr Flavin's performance bonus equals 63.27 per cent of his salary.

While the other executive directors' pension contributions went to a defined benefit scheme, Mr Flavin's went to a defined contribution scheme, according to the report.

The total paid to all board members was €4.1 million, up from €3.47 million in 2005.

Tommy Breen, managing director of DCC Energy and DCC Environmental, received a total package of €679,000, including salary of €346,000 and a performance bonus of €218,000 (63 per cent of his salary).

Kevin Murray, managing director, DCC Healthcare, received a total package of €678,000.

Mr O'Dwyer's total package was €719,000, including salary of €314,000 and a performance bonus of €198,000 (63 per cent).

The DCC board has seven non-executive directors, including chairman Alex Spain who was paid €142,000.

The Irish Examiner reports that further interest rate hikes will follow yesterday’s third increase from theEuropean Central Bank since December, economists warned last night.

IIB Bank chief economist Austin Hughes said the rises were having a negative impact on consumer sentiment in this economy.

“The sequence of rate hikes is weighing on Irish consumer sentiment and could cause problems for some borrowers, but the Irish economy and its housing market won’t suffer a major blow. We expect the ECB will raise rates further in August and again towards end year,” he said.

In December 2005 the ECB raised rates by 0.25% to 2.25%, signalling the end of the historic low interest rate regime borrowers had enjoyed for several years.

Analysts said the latest rise was an acknowledgement that eurozone economies were entering a solid growth phase following the recovery that has been taking place in the US in recent years.

Mr Hughes took some comfort from the fact the rise was just 0.25% and felt the statement form Jean Claude Trichet, president of the ECB, was “less threatening than feared”.

“We expect the ECB will raise rates further in August and again towards end of the year”, he said, echoing the general view of commentators across Europe.

Dara Deering, head of mortgages at EBS Building Society, said she expected rates to be 3.25% by the year end and possibly 3.5% by the end of the first quarter of 2007. She admitted she was more “hawkish” on rates than others.

Mr Hughes made the point that the feared hike of 0.5% this time out was not a runner, given the turbulence in equity markets which has seen most of this year’s gains by all Europe’s key stock markets wiped out in the past few weeks.

In trying to gauge the mood of the ECB, Mr Hughes felt it might have been concerned an aggressive rate hike could weaken growth in the eurozone.

In the case of the German economy that trend is just over 2%, and Europe’s biggest economy has just reached that level after years of sluggish growth.

That economic expansion pales by comparison with the 5%-plus growth in prospect for Ireland and the more robust growth in the US and Asian economies, analysts have said.

Mr Hughes said the equity market turbulence and the strength of the euro posed downside risks to the eurozone. He said for that reason ECB mandarins were careful not to upset the markets further by going for a 0.5% rate rise.

Niall Dunne of Ulster Bank also felt the ECB would have risked credibility with the markets if it had gone higher than the 0.25% hike.

It has worked hard at trying to keep the markets appraised of interest rate policy in such a way as to prevent any unnecessary shocks. For that reason, Mr Dunne believed yesterday’s hike was never going to go above 0.25%.

Most analysts are in no doubt that rates will rise by at least another 0.5% before the year end, while some believe further increases will follow in 2007.

The Financial Times reports that China and Saudi Arabia have been named as two of the five economic areas that will participate in the International Monetary Fund’s efforts to resolve the world’s glaring trade imbalances. The other three participants will be the economic superpowers of the US, the eurozone and Japan.

The IMF said this week that this new group of five systemically important economic areas for the global economy would engage in its first “multilateral consultations” aimed at “how to address global imbalances while maintaining robust global growth”.

The announcement casts a shadow over the gathering of the Group of Eight finance ministers in St Petersburg on Friday, since it points to the irrelevancy of the G8 in solving the world’s biggest economic problem.

Rodrigo Rato, the IMF managing director, said that the five economies had been chosen and had agreed to participate because their co-operation was crucial for the imbalances to be reduced.

“These economies are either ones with large current account surpluses or deficits, or they represent a large share of global output,” he said.

“Their co-operative action can play a major role in the orderly unwinding of these imbalances and in sustaining global growth as savings, consumption and investment patterns adjust.”

Saudi Arabia, as the world’s largest oil exporter with a current account surplus of 28 per cent of GDP in 2005, will represent oil producing countries, which have accounted for the most rapidly growing surpluses over the past two years.

Although G8 finance ministers meet at least four times a year to declare their latest thinking on the world’s economy, most of the individual members are peripheral to global imbalances.

The UK and Canadian economies are too small, while the IMF’s decision to include the eurozone alone shows that Germany, France and Italy can play a part in resolving imbalances only as part of a wider economic area.

The multilateral consultations will start with IMF staff visits to the five economic areas, focusing on spillovers and linkages among these and other economies, rather than on domestic economic issues. The IMF hopes to reach a conclusion by the end of 2006.

The FT also reports that UK house price inflation in May rose to its highest level for 14 months, according to Halifax, the mortgage lender, but it added there were increasing signs that the market was beginning to slow.

Halifax's measure of annual house price inflation rose from 8 per cent in April to 9.1 per cent in May, as last year's spring weakness in the market dropped out of the annual comparison.

The lender said prices grew by only 0.1 per cent in May, a pause after the rapid monthly growth rates of 2 per cent, 1.1 per cent and 1.5 per cent it recorded in the previous three months.

Halifax's estimate of house price inflation is currently out of line with other leading measures. Nationwide reported prices growing at a 4.7 per cent rate in May and the FT house price index recorded an inflation rateof 4.3 per cent in April. The FT house price index for May will be published today at 9.30 am.

The house price recovery that started last autumn is now almost fully reflected in the annual inflation figures and has further reduced the affordability of housing for first-time buyers.

Mervyn King, governor of the Bank of England, warned last month that housing was still expensive compared with almost any such measure as incomes or rents. Analysts, correspondingly, do not think house price inflation will continue to rise though the year.

Martin Ellis, chief economist of Halifax said there were increasing signs that the market was beginning to slow, including the slowdown in mortgage approvals and his estimate of monthly house price growth.

"The pressures on the household sector resulting from higher unemployment and significantly higher household bills, together with the current high level of house prices in relation to earnings, are likely to constrain housing demand and curb house price growth and activity over the remainder of 2006," he added.

Kelvin Davidson of Capital Economics predicted that the market would continue to slow through the summer and in the rest of the year: "Mortgage demand looks like it has peaked, while the Royal Institution of Chartered Surveyors continues to report moderating new buyer interest," he said.

The New York Times reports that braking a steep slide in global equity markets, American stocks retraced their losses yesterday, recovering to finish roughly where they began.

But the question now facing investors is whether this upward swing will continue. Yesterday marked the first trading day since last Thursday that stocks did not decline, and the Dow Jones industrial average remains below the 11,000 barrier. It closed at 10,938.82, a gain of 7.92 points, or 0.07 percent. Yet at midday the index had been off nearly 200 points.

The broader Standard & Poor's 500-stock index finished with a gain of 0.14 percent, closing at 1,257.93, while the technology-heavy Nasdaq composite index lost 0.3 percent for the day to close at 2,145.32; both were down sharply at midday.

" 'Was this the bottom?' will be the question that haunts us for the next few days," said Bill Groeneveld, head trader at vFinance Investments. "I don't think anyone will be coming out of the gate saying, 'Wow, this was a nice turnaround.' " For the week, the Dow is still off.

American investors have been in an edgy mood since Monday, when Ben S. Bernanke, chairman of the Federal Reserve, signaled that the central bank would continue to fight inflation with higher interest rates.

Markets in Europe and Asia were rattled by similar concerns yesterday as central banks there raised interest rates. An unexpected interest-rate increase by the central bank in South Korea contributed to the Asian declines. In Europe, a quarter-point increase in the European Central Bank's benchmark short-term interest rate, though widely expected, nonetheless pushed Continental markets lower. Denmark, South Africa and India also raised rates, though the Bank of England announced that it was leaving its rates unchanged.

The Fed's rate-setting committee will next meet on June 28 and 29.

Investors around the world have been preoccupied lately with the prospect of rising interest rates and the threat of inflation at a time when economic growth is showing signs of slowing, especially in the United States.

"These things are sort of feeding off each other, and at the moment they're not playing out in a favorable way," at least for stocks, said Mark Cliffe, global head of financial markets research at ING. "It's sort of taking on a bit of a dynamic of its own, which is sort of what makes it so dangerous."

When stocks were posting some of their heaviest declines earlier in the day, the New York Stock Exchange imposed its trading collars, which help stabilize trading by temporarily halting the sale of some stocks.

Oil prices fell and the dollar gained yesterday, touched off by reports that Abu Musab al-Zarqawi, a major terrorist figure in Iraq, had been killed. The benchmark contract for crude oil to be delivered next month fell 47 cents, to $70.35 a barrel; tensions over Iran's nuclear program had driven the price up to $72.60 a barrel as recently as Monday.

Still, the yield on 10-year Treasuries, which moves in the opposite direction of the price, fell slightly, to 4.996 percent, a sign that investors think inflation could ease in the coming months. The price rose 6/32, to 101.

"The fact that bond prices are going up is actually a vote of confidence in the Fed that they'll get it right," said Stuart G. Hoffman, chief economist at PNC Financial. "And in the long term, that will be good for stocks. That will mean that interest rates will stop going up. And that will help sustain economic expansion, not weaken it."

A more long-term risk to the economy, analysts said, is if the Fed raises interest rates too high as the economy is slowing down. "This is where policy makers have to act very carefully," Mr. Cliffe said. "A misstep could lead to an exaggerated reaction in the markets, which in turn could have real-world consequences, particularly if stock markets continue to fall."

Yesterday's global declines appear to result in part from investors tending to be less willing to tolerate the high levels of risk that they have accepted in recent years.

"We're seeing a reversal of a multiyear trend of increasing risk in portfolios," said Markus Krygier, chief currency strategist at Dresdner Kleinwort Wasserstein in London. "You have a lot of investors realizing that they have a lot of risk in their portfolios, and they're scaling back."

Major stock indexes in France, Germany and Britain and smaller markets throughout Europe posted losses of 2.5 percent or more yesterday.

The NYT als reports that new accusations of corporate stock option abuse were leveled yesterday, this time against Cyberonics, a medical device maker that is no stranger to controversy.

The company's board approved stock option grants for top executives one evening in June 2004, a few hours after receiving positive news about the regulatory prospects for a promising product. When trading began the next morning, Cyberonics shares soared, and along with them, the value of the options.

Yesterday, Cyberonics shares plunged nearly 16 percent when trading began, after Amit Hazan, a device industry analyst for SunTrust Robinson Humphrey, published an investor advisory about his concerns over the timing of those stock options, which were granted to Robert P. Cummins, Cyberonics' chairman and chief executive, and two of his lieutenants.

The analyst's report criticized the option grant, saying it gave Mr. Cummins an instant paper profit of $2.3 million, and profit of $150,000 each for the other two executives, but did nothing for other shareholders.

Mr. Cummins and the company countered that because the option grant had been immediately reported to the public and that he and the other men had not yet exercised any of the options, there was no cause for controversy. By the end of regular trading yesterday, the stock had regained most of its losses, closing down 20 cents at $23.59.

Mr. Hazan did not accuse Cyberonics of backdating the options to a day when prices were particularly low — a practice that has recently been reported among more than 30 companies and has become the subject of a Justice Department investigation. But, he wrote, "the effect was exactly the same."

A number of technology companies, most recently McAfee, which makes antivirus software, have announced the departures of senior executives as a result of questions about options dating. The Securities and Exchange Commission has been investigating issues surrounding dating for more than a year.

Mr. Hazan, who said he was surveying all the companies he follows for potential backdating issues, focused on Cyberonics options that were granted at a special board meeting on the evening of June 15, 2004. That was only hours after a Food and Drug Administration advisory panel recommended that the agency approve Cyberonics's request to market its implantable nerve stimulator as a treatment for severe chronic depression.

Mr. Cummins received options on 150,000 shares at an exercise price of $19.58, the closing price the day before the F.D.A. panel's recommendation. The chief medical officer, Dr. Richard L. Rudolph, and the vice president for regulatory affairs, Alan D. Totah, who played pivotal roles in winning the panel's backing, each received options on 10,000 shares at that price.

The shares soared when trading resumed the next day, June 16, closing at $34.81, as investors bet that Cyberonics might soon be selling a new approach to treating the most severe forms of depression, a condition that affects millions of Americans annually.

"The board acted on an event before investors were able to do so," Mr. Hazan said yesterday in an interview. "It's a perfect example of an abusive option. Options are supposed to be an incentive to align executives' interests with shareholders. This was just a reward."

Mr. Hazan said that because the options were priced below what would become the market value the instant that trading resumed, they should have been accounted for as compensation in that quarter. Because the company did not do so, it might have to restate its earnings for that fiscal year, he said.

Mr. Cummins, an imposing and combative executive already known for prickly relations with critical analysts and skeptical investors, e-mailed Mr. Hazan yesterday, sarcastically thanking him for "a completely uninformed note" about "a nonissue," Mr. Hazan said.

Mr. Cummins said in a telephone interview that all the options had been legally priced, properly reported and approved by the company's auditors and lawyers. He acknowledged that the options had been a reward but said that they had been designed to conserve the company's cash and to serve as an incentive because they vested over a five-year period. The only way to benefit from them, Mr. Cummins said, would be to "create and sustain value over time."

Mr. Hazan said that the company's response did nothing to change his attitude. "My problem is the timing of when they did this," Mr. Hazan said. "The fact that it doesn't vest immediately doesn't mean it was ethical, and I haven't heard from one institutional investor today who disagrees with me."

The options granted to the executives in June 2004 are now 38 percent vested. At yesterday's closing price for Cyberonics, the value of the vested options was $601,500 to Mr. Cummins and $40,100 each to the others.

Mr. Cummins and the company said he exercised options on 350,000 shares in February 2005 and sold them at prices ranging from $40 to $45, but those options had been granted earlier: in October 1997, March 1999 and June 2001. He has been chief executive of Cyberonics since 1995.

As it turned out, Cyberonics's price began falling soon after the June advisory panel meeting and plunged to $14.36 that August, the day after the F.D.A. took the unusual step of ignoring the panel's recommendation and refusing to approve the application.

Cyberonics' implant, a battery-powered, pacemakerlike device that stimulates the vagus nerve just below the neck, has been used widely since 1997 as an F.D.A.-approved treatment for epilepsy. But the clinical trial data the F.D.A. considered in 2004 did not show conclusively that VNS Therapy, as the treatment is called, was effective for severe depression when compared with patients who had a device implanted but no power turned on.

Mr. Cummins bitterly criticized the agency at the time. Through a combination of lobbying and additional data, Cyberonics got the F.D.A. to reverse its stance, with conditions, in February 2005. It received final approval last July to market VNS Therapy for depression, but not before the controversy led to an inquiry by the Senate Finance Committee into the tangled process.

Since then, Mr. Cummins has spent much of his time battling insurers who label the therapy experimental and who are hesitant to pay for it as a depression treatment.

By the end of April, 1,100 patients had VNS implants for depression, and 1,200 more were appealing for insurance coverage, Cyberonics said.

Mr. Hazan, the analyst, said that he was optimistic about the long-term prospects for VNS but that resistance from insurers was another factor in his decision to downgrade his rating on Cyberonics yesterday to neutral from buy.

The company recently reported that it lost $5.2 million, or 21 cents a share, on revenue of $123.4 million in the fiscal year that ended April 28.

Cyberonics and analysts who favor the stock say much of the insurers' resistance stems from the focus of the original clinical trials on three-month results, too short a period to demonstrate an advantage. But more data, they say, has shown that the rates of remission of depression symptoms in VNS patients remain high in two-year follow-up data, while those receiving other treatments suffer relapses.

Data presented last month at a scientific meeting in Toronto also suggested that rates of suicide and hospitalization drop steadily for patients on VNS Therapy for two years.

The pro-VNS argument received an indirect boost yesterday with the publication in The Journal of Clinical Psychiatry of research documenting the high failure rate of conventional drug and electroconvulsive therapies for patients suffering recurrent bouts of severe depression.