The Irish Independent reports that the Minister for Enterprise, Trade and Employment Micheal Martin is expected to announce more than 300 new jobs for the Shannon Free Zone today.

The Irish Independent also reports that chief executives are less hopeful about property market, survey reveals Ireland's bosses are less optimistic about the country's prospects, or the outlook for house prices, according to the annual survey of the Top 1,000 companies in Ireland by estate agents CB Richard Ellis.

The Irish Times reports that Aer Lingus shares yesterday fell below the symbolic €2.80 a share price which Ryanair is offering as part of its €1.4 billion takeover bid.

There were no indications last night that Ryanair, which can enter the market to buy shares below the bid level, was preparing to do so. The company declined to comment, pointing out that it was in an offer period.

Market sources said there was no one reason for the softening in the price, although most said the trading involved hedge funds. Other conventional funds like Gartmore have also been selling some shares.

Members of the Aer Lingus Employee Share Ownership Trust are currently balloting on the Ryanair offer, but most observers believe they will strongly reject the approach.

Some dealers cited the "vigorous opposition" of Taoiseach Bertie Ahern to the proposed takeover as outlined by him to the European Commission yesterday.

In a three-hour meeting with Commission president José Manuel Barroso and all 25 commissioners, Mr Ahern said he vigorously opposed the emergence of a new aviation monopoly in Ireland through the proposed takeover of Aer Lingus by Ryanair.

"As an island nation, Ireland needs a range of competitive air services," Mr Ahern told reporters after the meeting. "We think real competition between Aer Lingus and Ryanair is needed and the basis we have now is the best on overall terms."

Mr Barroso said the commission was committed to supporting competition in the aviation sector and underlined that EU regulations had been instrumental in changing the landscape in Europe to one of lower fares for consumers.

However, he said that the commission had yet to determine if it fell under its competence to rule on the merger, or whether it was a question for the national competition authorities in Europe.

He said an initial decision from the commission on the proposed bid would be announced on December 6th.

It is understood competition commissioner Neelie Kroes outlined the procedure the commission will follow in its investigation of the proposed merger at the meeting.

Mr Ahern also pressed the commission to adopt a more flexible approach to the issue of allowing State aid to be offered to innovative companies such as Intel. Last year, the commission vetoed a decision by the Government to award tens of millions of euro to Intel to support the construction of a new chip plant in Kildare.

In his address to the commission, Mr Ahern said competition and State aids policy needed to move from an overly localised focus to a European-based approach.

"There is a real need to take account of the fact that Europe, in seeking to attract mobile investment, is in competition with other major economic powers," he added.

Mr Ahern also expressed his strong support for the commission's efforts to find a resolution to the community patent issue.

Marc Coleman, Economic Editor, writes in the The Irish Times that since the early 1990s, the Central Bank has been the boy who cried wolf, warning us about rising risks of a property bubble and a debt crisis. When house prices slowed last year, the crowds decided to go home and the bank's Financial Stability Report of that year concluded that there was no more market for the message.

In that report, the risk of a housing bubble was seen as having receded. And if there was some overvaluation in the market, the Central Bank saw it as likely to be easily correctable.

This year, the bank has returned to form. Its latest stability report, published yesterday, notes how the latest annualised rate of house price increase was 14.8 per cent, twice the rate of growth prevailing at the time of last year's report.

With no shortage of potential house buyers and constrained supply in desirable areas, the fact that lending banks let it all hang out meant house price inflation was destined to take off. Leading Central Bank economist Frank Browne was careful to qualify the bank's point about standards easing.

"Standards here don't mean good standards. They mean criterion for lending. For a lot of people, this is good news." But how realistic is this view? Sure, more liberal lending practices increase the credit available to lenders. But for precisely the same reason, they push up house prices.

One table in the review - the part analysing affordability of housing - examines this question more closely. If its analysis is right, the opposing effects on affordability of looser credit and higher prices have mostly cancelled each other out. Defining affordability as the ability to finance repayments on the average home with less than 40 per cent of disposable income - on a 40-year repayment - it concludes that affordability now is the same as in the mid-1990s and the early 2000s.

What has worsened - dramatically for younger borrowers - is exposure to increases in interest rates. Older borrowers' repayments were calibrated at the higher average interest rates of old and a quarter point hike is small beer for them. For younger borrowers starting life at rates of around 3 per cent, that hike is grievous. "The notion that there wouldn't be pain is what I'm trying to deal with," as Mr Hurley put it.

But for the banking system, yesterday's report constitutes a clean bill of health - so far that is. Solvency - the system's ability to meet its repayment liabilities - remains in excess of regulatory minimums and the level of banking liquidity is above minimum requirements.

The "so far" caveat is important. From a ratio of 160 per cent of personal disposable income last year, private sector credit will by the end of this year jump to 192 per cent, pushing us past the Netherlands and Britain - and to top of the "old" EU - for the first time in our history. And compared to those countries, our range of banking assets is too property centred.

In summary, as far as its position is concerned, Ireland's aggregate financial situation is still okay. As far as its direction is concerned, that's an entirely different matter.

The Irish Examiner reports that mounting debt and rising interest rates have increased the risks of serious financial trouble for householders, the Central Bank has warned yesterday.

In the event of a hard landing, as many as one-in-10 mortgage holders could end up in trouble, Central Bank governor John Hurley said. But the bank continues to predict a soft landing as the “most likely outcome”, saying both Irish and global economic fundamentals were reassuring.

Mr Hurley was speaking at the launch of the bank’s Financial Stability Report 2006. “The strong increases in house prices, along with increasing interest rates, is contributing to a deterioration in affordability in the residential market,” he said.

The bank is concerned that soaring property prices and a general boom in construction is driving debt levels beyond safe limits.

Last month, the quest for property and the continuing expansion in construction drove private sector credit above €300 billion for the first time, with domestic mortgages accounting for over €100bn of that sum.

Figures released yesterday by the bank revealed that, since 2003, the rate of private sector credit soared to 190% of GNP and will hit 227% of GNP by the end of this year.

Domestic debt is the highest in Europe after the Dutch and rising three times faster than the European average, while household debt-to-disposable income is projected to reach 150% by the year end. With much of the total figure of €300bn sunk into either housing or the general construction industry, both banks and borrowers are extremely vulnerable if there was a sudden collapse in the property sector from either an external or internal shock, warned the bank.

In the event of a hard landing, up to 10% of mortgages could end up in trouble, said the governor. In a separate assessment, the bank found that just 50% of households could afford to take on the average mortgage at current interest rates, even it was spread over a 40-year period. If current house prices do not soften, then only 20% of earning households could afford the average mortgage in five or six years’ time, concluded the analysis.

The Financial Times reports that Jean-Claude Trichet, European Central Bank president, has defended the use of money supply data to help guide interest rate decision-making, despite the scepticism of other central banks and academics.

His comments are likely to heighten speculation the ECB will raise interest rates further in 2007 after next month’s expected quarter percentage point rise in its main rate to 3.5 per cent.

Writing in Thursday’s Financial Times, Mr Trichet brushes aside objections to the use of such data, saying it has been an important factor in ECB interest rate decisions in recent years.

Monetary analysis was used by European central banks prior to the launch of the euro in 1999 and “this legacy cannot be disregarded lightly”, he writes.

Mr Trichet’s comments highlight the central role that M3, the broad money measure, is playing in ECB deliberations as it continues to tighten monetary policy.

M3 is growing at an annual rate close to the fastest seen since 1999, while growth in eurozone lending to business has reached a record high.

Other central banks, including the US Federal Reserve, are sceptical about the use of such measures and Mr Trichet acknowledges “the dominant academic view seems to be that monetary aggregates should have no part in monetary policy decisions”.

But he says: “I cannot dispel my doubts that a model of monetary policy that includes no role for money is incomplete in some important respects.”

Monetary analysis forms one of two pillars used by the ECB when setting rates. The other encompasses a more general economic analysis. But Mr Trichet writes: “When the economic analysis is complex and its conclusions uncertain, cross checks with the monetary analysis have proved extremely useful.”

The ECB’s decision not to reduce interest rates below 2 per cent in 2003 and 2004 as well as its decision to start tightening policy in December 2005 “are testimony to the value of such cross checks”, he writes.

Mr Trichet insists he is not a “monetary Luddite”, arguing that economists are starting to address the shortcomings of monetary analysis – taking into account the sophistication of financial markets and exploring links between monetary developments and asset prices.

The ECB on Thursday hosts a two-day conference in Frankfurt on “the role of money”. Speakers will include Ben Bernanke, chairman of the US Federal Reserve, and Zhou Xiaochuan, governor of the People’s Bank of China.

“We should strive to use the new and more sophisticated techniques that are being developed to enhance and complement the principles underlying our past successes,” Mr Trichet concludes.

The FT reports that the head of Barclays Global Investors, the world’s biggest money manager, has said the distinction between hedge funds and the mainstream asset management business has become increasingly “arbitrary” as the two industries converge.

Blake Grossman, chief executive of BGI, told the Financial Times in a rare interview: “The notion that there is a traditional way of investing that is long only, and then there is hedge funds, is crazy. We’re seeing real convergence.

“We’re getting mandates to employ some degree of short-selling, some degree of derivatives ... If you look out five years, there will be much less of a divide between what’s considered a hedge fund and what’s considered a traditional strategy.”

His comments come as large money managers are increasingly adopting the strategies and fee structures pioneered by hedge funds as they attempt to cash in on growing demand from institutional and private investors. Investment banks such as Morgan Stanley and Lehman Brothers have also started acquiring minority stakes in alternative asset managers.

BGI, which is controlled by Barclays, the UK banking group, and has $1,600bn under management, is best known as a manager of passive and exchange-traded funds.

However, it is also at the forefront of the trend to convergence. It is a purely quantitative manager, and uses computer-driven strategies in its active investing that make heavy use of derivatives, shorting and synthetics – to the point that many of its strategies are interchangeable with those of a large hedge fund.

Close to a fifth, or about $80bn, of BGI’s actively managed money has a fee structure similar to that of hedge funds, charging a performance fee of 20 per cent. This suggests that the fee structures used by hedge funds might prove more durable than some observers have predicted.

Mr Grossman said: “What’s going to happen with hedge funds is there will be more pressure to justify the fees. Provided there’s real alpha [outperformance of the market], we don’t see pressure out there on the fee structure ... are there too many hedge funds out there? Certainly. You don’t need 6,000 hedge funds. There aren’t 6,000 really smart 27-year-olds.

“The arbitrary divide that is in the market now between traditional strategies and hedge fund strategies, is absolutely arbitrary,” said Mr Grossman.

Peter Knez, who heads BGI’s fixed income division, said: “What is a hedge fund? I don’t know the difference. We have a derivatives-based relative value strategies fund, is that a hedge fund?”

The New York Times reports that after five years and frequent delays, Microsoft announced yesterday that it had finished the new version of its Windows operating system, Windows Vista.

The finished code will start going out immediately to many large corporate customers. The formal introduction date for large corporate users will be Nov. 30, with a marketing event in New York. Vista will be available for the home and small-business market, both installed on PCs and sold separately, on Jan. 30, Microsoft confirmed yesterday.

Jim Allchin, the senior Microsoft executive in charge of Windows, pronounced Vista “rock solid” and “ready to ship.”

The new operating system, originally code-named Longhorn, has been slowed by delays; some ambitious features were dropped three years ago when the project started over from scratch. But analysts say the inviting graphics, and improved reliability, security and ease of use make Windows Vista the most significant advance in the Microsoft operating system in more than a decade.

Vista comes five years after the previous version, Windows XP, was introduced. Part of the reason development takes so long is that Windows, the dominant desktop operating system, is the keystone in a vast industry ecosystem of more than a hundred personal computer makers worldwide and thousands of hardware device manufacturers and software companies, whose technology must work well with each new version of Windows. Yesterday, one of those companies, Nvidia, a leading maker of chips for computer graphics, introduced a graphics card tailored to work with Vista.

Windows has also been riddled in recent years by security flaws, which have been exploited by Internet-borne malicious software. The problem prompted a rising chorus of complaints from Microsoft customers, especially large corporations and government agencies. Microsoft made painstaking efforts to ensure that Vista was far more secure than earlier versions of Windows.

“There are many good reasons to run Windows Vista,” Mr. Allchin said, “but in my view security is at the top of the list.”

Still, the arrival of Vista in the consumer market after the holiday sales season promises to make things difficult for personal computer makers, like Dell, Hewlett-Packard, Lenovo and others. PC makers are cutting prices to attract year-end buyers, and Microsoft is distributing coupons allowing free or discounted upgrades to Windows Vista on PCs sold this year. But many users are expected to put off buying a PC until next year, when Vista will be installed on new machines.

“The Vista delay is really going to hurt PC manufacturers this holiday sales season,” said Charles R. Wolf, an analyst for Needham & Company.

Vista is, however, expected to stimulate PC sales next year, helping lift worldwide growth from 8 percent this year to 10 or 12 percent next year, analysts said. Consumers, who now account for 40 percent of PC sales, are expected to move more quickly toward Vista than corporate buyers.

That will help lift the industry, and add an extra $1.6 billion to Microsoft’s revenue next year, Richard Sherlund, an analyst at Goldman Sachs, estimated.

The NYT also reports that when Seth J. Sternberg and two colleagues started Meebo, a Web-based instant-messaging service, they didn’t go looking for venture capitalists. Using their credit cards, they financed the company themselves to the tune of $2,000 apiece. It was enough to cover their biggest expense — leasing a few computer servers at $120 a month each.

Within a month of its introduction in September 2005, Meebo was getting as many as 50,000 log-ins a day, and it needed more servers. It decided to take a modest $100,000 from three angel investors, wealthy individuals who typically contribute small amounts but do not get involved in management decisions.

“We had a bunch of V.C.’s talking to us about potentially putting more money in,” Mr. Sternberg said. “We said no. A lot of things happen when you raise a V.C. round, and they really slow you down.”

Eventually, Meebo did raise money from venture investors — about $3.5 million from Sequoia Capital. But that was after the company was well on its way to showing that its service was a hit; Meebo had about 200,000 daily log-ins.

In the last couple of years, hundreds of other Internet start-up companies in Silicon Valley and elsewhere have followed a similar trajectory. Unlike most companies formed during the first Internet boom, which were built on costly technology and marketing budgets, many of the current crop of Internet start-ups have gone from zero to 60 on a shoestring.

Some have gone without venture capital altogether or have raised far smaller sums than venture investors would have liked. Many were sold for millions before venture capitalists could even get in. That has been a challenge for venture capitalists, who have raised record amounts in recent years and need places to put that money to work.

“V.C.’s hate it; they want you to take big money,” said Jay Adelson, who is the chief executive of two start-ups, Digg and Revision3. Digg took some venture money, but far less than backers offered, and Revision3 has been running on about $850,000 raised from a group of angel investors.

Several venture firms are seeking to adapt. Just last week, Charles River Ventures announced it would offer loans of $250,000 to entrepreneurs as a way to gain access to promising start-ups. Other firms are also giving out small loans, albeit not as a part of any formal program.

For its part, Mohr Davidow Ventures has increased the number of “seed” investments — small sums given to embryonic companies — to about 10 a year from 5. And Union Square Ventures, which was formed in 2003, has made nearly half of its investments at $1 million or less, a departure from its initial plan to make first-round bets of $1 million to $3 million, according to its Web site.

“I think there is in the V.C. community a sense that the rules have changed or are changing,” said John Battelle, a journalist and entrepreneur, who is a host of a technology conference in San Francisco this week that will include a panel on the subject. “How does the V.C. who is set up for a model that requires millions, if not tens of millions, revamp for a different scale?”

And as large firms try to go small, they are encountering a new crop of competitors who are happy to bankroll start-ups on the cheap and are fueling the current Internet boom. They include a large pool of angel investors and a number of small venture funds whose specialty is to invest tens of thousands of dollars, or hundreds of thousands at most.

There is even a group called Y Combinator, whose rule of thumb for investing in start-ups is $6,000 per employee. One of its investments, Reddit, was acquired last week by Wired Digital, which is owned by Condé Nast Publications, for an undisclosed sum.

“I came to the conclusion that $500,000 was the new $5 million,” said Michael Maples Jr., an entrepreneur who created a $15 million venture fund aimed at investing in companies that required little capital. Mr. Maples sees himself not so much as a competitor to venture capitalists, but as someone who is filling the gap between angels, who may invest $250,000 or so in a start-up, and venture investors, whose typical early-stage bet is closer to $5 million.

Several forces are allowing companies to operate cheaply compared with the first Internet boom. They include the declining costs of hardware and bandwidth, the wide availability of open-source software, and the ability to generate revenue through online ads.

“It’s a great time to be an entrepreneur,” Joe Kraus, a veteran of the dot-com boom, wrote in a widely noted blog posting last year. Mr. Kraus said it took $3 million to get his first start-up, Excite.com, from idea to product, much of it spent on servers and software, which have since become much cheaper or even free. His new start-up, JotSpot, was started on just $100,000.

With the notable exception of YouTube, many recent acquisitions involved Internet start-ups that simply could not effectively use large amounts from venture capitalists or produce large returns, said Paul Kedrosky, a venture capitalist and blogger.

“The problem is that as a V.C., these companies don’t soak up enough capital,” Mr. Kedrosky said.

To succeed, a firm with a $250 million fund needs a handful of investments from $10 million to $15 million that can return payouts of $150 million or more, Mr. Kedrosky said. But even a twentyfold return on a $1 million investment will not do much for the success of a large fund, Mr. Kedrosky said.

For smaller funds, the economics are far different. For starters, those who manage them do not earn huge management fees. Instead, they are almost always among the largest investors in the fund, so they will earn a return if the investments pay off.

“I think large venture funds in this economic model have a challenge,” said Josh Kopelman, managing director of First Round Capital. Since starting First Round in 2004, Mr. Kopelman has made about 30 investments that range from $250,000 to $500,000. Mr. Kopelman, who made a fortune as a serial entrepreneur, is the largest investor in First Round’s $50 million fund.

Y Combinator is aiming at even smaller firms, and its approach is decidedly unorthodox. It chooses companies for financing in two batches of 8 to 12; one batch is selected in the winter from companies based in Silicon Valley, the other in the summer from those in Cambridge, Mass.

“When you change the amount of money, a lot of things change,” said Paul Graham, one of four partners in Y Combinator, who made millions when his company, Viaweb, was sold to Yahoo in 1998. “We have to mass-produce things. We can be more risky. We are like mice, and V.C.’s are more like elephants. They can only make a few deals, so each one has a whole amount of weight and worry attached to it.”

As for the target investment of $6,000 for each employee, an explanation on Y Combinator’s Web site makes it clear that Mr. Graham and his colleagues are not looking for computer science entrepreneurs who want to be pampered: “C.S. grad students at M.I.T. currently get $2,000/month to live on, so this represents three months’ living expenses. Though in fact most groups make it last longer.”

Established venture capitalists, however, say the new crop of capital-efficient start-ups represents an opportunity, not a problem.

“Companies have bootstrapped themselves in earlier eras,” said Gary Morgenthaler, a general partner at Morgenthaler Ventures. “There is no shortage of companies that need venture capital and company-building skills.”

Jon Feiber, a general partner at Mohr Davidow Ventures, said it was “incredibly good and healthy” that many Internet start-ups were able to do more with less.

“A small percentage of those companies will lend themselves to the model of a larger fund,” Mr. Feiber said. “If your goal is to generate something of huge value and scale, it is going to take more than $300,000 or $400,000.”

JotSpot, the company that Mr. Kraus started on $100,000, may fit that mold. The company eventually took in $4.5 million from a pair of venture capital firms, and last week it was acquired by Google for an undisclosed sum.

“I think it could be a great time to be a venture capitalist,” Mr. Kraus said in an interview. “Like in any competitive market, fear and hope are the two competing forces.” And for venture capitalists, the success of scrappy start-ups may simply be heightening the fear. “I think there is a lot of fear that people won’t get into the best deals,” Mr. Kraus said.