The Irish Independent reports that the economy will slow sharply next year and there are serious concerns about whether the present pattern of growth can be sustained, the Economic and Social Research Institute (ESRI) says in its latest quarterly analysis.

The Irish Independent also reports that European Central Bank Governing Council member Mitja Gaspari said he had doubts about ECB interest rates reaching 4.25 percent by year-end, based on current information.

The Irish Times Economics Editor Marc Coleman writes that the period of exceptional economic growth known as the Celtic Tiger will come to an end next year, according to two new economic forecasts released yesterday.

In an assessment of the sustainability of the economy's 15-year-long boom, the Economic and Social Research Institute (ESRI) also warns that it is now "imperative" to stop the economy from losing competitiveness.

According to forecasts contained in the ESRI's latest Quarterly Economic Commentary, Gross Domestic Product (GDP) is set to grow this year by 5.4 per cent before slowing to what the authors term a "more sustainable" rate of 3.9 per cent in 2008.

Davy stockbrokers forecast, also published yesterday, suggests the economy will expand by 4.5 per cent this year, slowing to 3 per cent in 2008. Growth in GDP - the traditional measure of economic output - has remained above 4 per cent every year since 1993.

Davy's yesterday revised downwards their forecast for 2007 from 5 per cent, in response to data released by the Central Statistics Office (CSO) on Wednesday, which showed that new house building fell by 1.7 per cent year-on-year in the final quarter of last year, the first fall since 1997.

The data also reported that net exports - the contribution of exports to the economy adjusted for imports - declined by 10.2 per cent in the same period.

"This slowdown in growth is driven by a slowdown in housing investment, while investment in other building and construction should continue to grow strongly, driven in part by investment under the latest NDP," ESRI economist Dr Ide Kearney said yesterday.

Describing the latest ESRI forecasts as a "soft landing", she added that the economy was becoming more vulnerable to the housing market.

"A decline in real house prices could lead to a much larger reduction in the scale of house building."

The ESRI has calculated that, of the 310,000 houses built in the last four years, some 122,000 are now lying idle "Is this sustainable? We would argue not, but we are forecasting a soft landing for the economy," Dr Kearney said.

Dr Kearney, who along with Dr Alan Barrett and Yvonne McCarthy wrote the commentary, said inflation would continue to decline from its early-2007 peak of 5.2 per cent. However, it is expected to average 4.6 per cent for the year.

This is higher than previous ESRI projections, a move attributed to the expectation that the European Central Bank will raise interest rates once more this year. According to the ESRI forecasts, actual house prices will grow at rates below the rate of inflation this year and next, reducing the degree of overvaluation in the market.

However, Dr Kearney warned that speculators could trigger a "much sharper correction" in the market if confidence was damaged. "We need to find out why people are buying second houses and we don't know. That's key."

Davy economist Rossa White said new house building would fall by some 5,000 units in 2008, acting as a "drag" on the economy.

The Irish Times also reports that the European Commission will propose giving national regulators the power to split up incumbent telecoms firms such as Eircom if they continue to frustrate competition.

Information Society commissioner Viviane Reding announced the measure yesterday as she published a report showing Ireland's poor take up of broadband technology.

The commission's 12th annual report on the EU telecoms market shows Ireland is ranked 16th out of 25 EU states for the uptake of high-speed internet services.

Just 10.3 per cent of Irish homes and businesses have broadband compared to an EU average of 15.7 per cent. The best performing state is the Netherlands at 29.8 per cent.

Across the EU the uptake in broadband connections is improving with 20 million broadband lines added between October 2005 and October 2006.

The report pinpoints the lack of progress in opening Eircom's network to competitors through local loop unbundling as a key problem.

It also highlights the lack of effective enforcement powers open to ComReg to enable it to force Eircom to properly open its network, particularly the miserly maximum fine that is worth just €3,000.

In an attempt to tackle the slow pace of unbundling in several EU states, including Ireland, Ms Reding is proposing giving regulators the power to order the "functional separation" of incumbent firm's networks and their services arms.

She said this was one tool that could enable regulators to force incumbents to open their networks.

Britain is currently the only EU state that has persuaded the incumbent British Telecom to separate its network arm from its services arm. This means firms must create a separate management structure under the supervision of regulators to ensure competitors have easy access to the last mile of networks, which run into homes.

An EU official said there has been a rapid increase in requests to offer broadband services by British Telecom's rivals when "functional separation" took place.

Ms Reding also floated the idea of creating a type of "European FCC", modelled on the US Federal Communications Commission, to oversee and co-ordinate the work of national telecoms regulators such as ComReg. He said she did not want to abolish national regulators but rather would like to seem them function in a consistent way.

One of the key findings of the commission's 12th annual report on the telecoms market was that there was a wide variety regulatory systems across Europe. This created legal uncertainty for telecoms operators, according to Ms Reding, who cited the example of Greece were delays to regulatory appeals were hampering the market.

The report highlights delays as a key feature in Ireland where the appeals panel took more than a year to hear a single case despite having been set guidelines to hear cases within four months. It says the Government has admitted the mechanism has not delivered on some of its initial aims, especially regards speed and cost of proceedings.

The Irish Examiner reports that close to 40% of all houses built in the five years between 2002-2006 are vacant, which accounts for 122,000 of the 310,000 of the homes built over the period.

Those figures were described yesterday as extraordinary by Ide Kearney, co-author of the ESRI’s Spring quarterly economic bulletin. Ms Kearney said the figure is the up to date, based on the latest census findings.

That figure of 40% compares with one just one eighth of houses built as second dwellings or standing idle over the period between 1997 — 2001.

The ESRI said it was concerned about that level of increase coming on the back of its own findings that houses are 15% overpriced. That figure concurs with the findings of the OECD last year.

Putting those two findings together “we could suggest that there is a speculative element to the housing market emerging in Ireland”.

“We are forecasting a soft landing” for the housing market at this stage, she said.

But the latest figures for second dwellings and the sharp rise in foreign debt “raise the prospect that there is a speculative aspect to the market that could trigger a larger crash”.

“We need to think about this which is why we are putting the figure out there,” she said.

Given the housing phenomenon, the continuing loss of competitiveness and the growing balance of payments deficit the ESRI says serious question marks hang over the long-term sustainability of the boom.

Despite those concerns the ESRI said 2007 will be another year of “strong economic growth” with real GNP of 5.4% forecast by the Government’s think-tank.

That is down sharply on the figure of 7.4% for last year when growth was at its highest since 2002. Investment will slow however, relative to recent years, with growth of 5% expected this year followed by a more modest rise of 3.9% in 2008.

Growth in 2008 will fall sharply to below 4% as the country moves to a slower pace of growth in the years ahead.

This year’s performance will be underpinned by buoyant consumer spending and the impact of maturing SSIA accounts, said the ESRI.

The Financial Times reports that global mergers and acquisitions topped $1,000bn (€750bn) in the first three months of this year, the busiest first quarter on record.

The boom, driven by buy-out fever, ambitious chief executives, and cheap financing saw the volume of deals reach $1,130bn in the first quarter, a rise of 14 per cent on the same period last year, according to Dealogic the data provider.

The ratio of M&A deals to global GDP for the quarter was equivalent to an annual 8.8 per cent, not far short of the record 10.5 per cent ratio just before the dotcom crash of 2000.

“Private equity, with its ever increasing firepower, remains front and centre in driving deal volume. They are pervasive in auctions and are now moving up the size scale,” said Gavin MacDonald, head of European M&A at Morgan Stanley.

Carlo Calabria, head of European M&A at Merrill Lynch, added: “Activist shareholders are providing private equity with new opportunities as they continue to push for value in companies ... with recapitalisations or wider restructurings.”

Financial sponsor buy-outs reached $166.2bn during the period, a 53 per cent increase on the $108.4bn recorded in the first quarter of last year.

These deals accounted for 15 per cent of global M&A, compared with 11 per cent in the same period last year.

Volume was boosted by KKR and TPG’s $45bn bid for the US energy group TXU, potentially the biggest buy-out on record.

John Coyle, head of JP Morgan’s financial sponsor group said the pace looked set to continue. “[At the moment,] we don’t see anything that will get in the way of this freight train. The pipeline of sponsor deals continues to fill with very high quality transactions.”

The deal frenzy generated $4.6bn for financial advisers, though this was marginally down from last year’s same quarter. Some of the notable deals announced include Porsche’s $96.8bn bid for Volkswagen, Akzo Nobel’s $14.4bn sale of its pharmaceuticals business to Schering-Plough and Vodafone’s $13bn deal for mobile operator Hutchison Essar. Goldman Sachs and Morgan Stanley are neck and neck in the race to be the top global adviser, with Goldman advising on 95 deals worth a total $279.9bn. Morgan Stanley is mandated on 99 deals,valued at $273.9bn. JP Morgan ranks third with 85 deals worth $228.7bn.

Global M&A rankings Q1 2007

The FT also reports that Nicolas Sarkozy has underlined his determination to block foreign takeovers of strategic French companies by fiercely condemning last year’s acquisition of Arcelor, Europe’s biggest steel group, by Lakshmi Mittal, the Indian billionaire, as a “waste”.

The presidential frontrunner voiced a sharp protectionist twist to his industrial policy at a campaign rally in Lille on Wednesday night. His comments are likely to shock many of his admirers in the US and UK, who see him as France’s best hope for reform.

Blaming the euro for low wages, promising to reintroduce “community preference” in the European Union and to combat “social, monetary and ecological dumping”, Mr Sarkozy launched an attack on “free trade”, which he called a “policy of naivety”.

“Look at the waste of Arcelor, which we sold off on the cheap because we believed that the steel industry was history. They got it wrong. They lied,” said Mr Sarkozy to a cheering crowd at Lille’s Palais des Congrès. “If I am president, then France will have a real industrial policy.”

Mr Sarkozy is one of the few French politicians to call himself an economic liberal.

Yet his record as finance minister in 2004 was notably dirigiste. He intervened to save Alstom, the engineering group, from bankruptcy and brokered an all-French merger of Aventis and Sanofi to avert a takeover by Switzerland’s Novartis.

In Lille, he stepped up his attacks on the European Central Bank (ECB) and the euro. “If wages are too low, it is because the euro is too expensive and when the euro is too expensive, companies try to stay competitive by making up for it on wages,” he said.

He promised to launch “a diplomatic offensive to get our partners to agree to put pressure on the ECB and above all to put in place a true economic government of Europe faced with a central bank that cannot continue to be accountable to no one”.

In his manifesto, leaked this week by La Tribune, Mr Sarkozy said: “Europe must not be the Trojan horse of globalisation reduced to circulation of capital and goods, but must on the contrary protect people within globalisation.”

He added: “This is what we were told by those who voted No in the referendum on the (European) constitution. It is a political fact.

“I want to say that I have heard them.”

The New York Times reports that with its accounting under scrutiny by federal regulators and prosecutors, Dell said yesterday that “evidence of misconduct” had been uncovered in an internal investigation of its financial practices over several years.

Dell said its board’s audit committee had “identified a number of accounting errors, evidence of misconduct, and deficiencies in the financial control environment.” The committee has been examining accounting and financial problems that the company previously said involved accruals, reserves and other balance-sheet items.

In a statement issued after the close of regular trading, Dell also said it was working with its independent auditors to determine whether it would have to revise financial statements. A spokesman for the company, based in Round Rock, Tex., declined to comment further.

Dell shares, which closed at $23.39 in regular trading, up 4 cents, fell by as much as 8 percent immediately after the announcement. They recovered somewhat, but were still off by more than 2 percent.

Dell released little information to its investors. It did not clarify whether the misconduct involved criminal activity or a violation of company ethical standards.

Dell has said it is facing investigations into its accounting practices by the Securities and Exchange Commission and the United States attorney for the Southern District of New York.

Thomas W. Luce III, a prominent Texas lawyer and chairman of the audit committee, signaled that the internal inquiry was nearing an end. “As we move toward the conclusion of our investigation,” he said in a statement issued by the company, “we are committing the time and resources required to ensure a thorough and comprehensive review and resolution of all identified issues and the implementation of appropriate remedial measures.” .

The fact that Dell did not, at this point, try to describe the size of a possible restatement suggested that the company did not see the accounting problem as involving a significant amount of money.

Dell also said it would further delay the required filing of its financial statements to the Securities and Exchange Commission for the fiscal year ended Feb. 2, because its investigation was not yet completed. That announcement was not unexpected. The company has delayed its financial filings for three consecutive quarters.

Dell announced an informal S.E.C. investigation last August and said in November that this had become a formal one. A spokesman said then that the inquiries had nothing to do with options backdating, an accounting issue that has embroiled a number of technology companies.

Dell’s chief financial officer, James M. Schneider, stepped down at the beginning of the year, and the company did not dispel speculation that his departure was related to the investigations of its accounting. He was replaced by Donald J. Carty, a former chairman and chief executive of AMR, the parent of American Airlines, who has been a Dell board member since 1992.

The inquiries come at time of considerable upheaval at the company. It was once the biggest PC maker in the world, but its computer sales are growing more slowly than those of many competitors. Its chief executive, Kevin B. Rollins, resigned at the end of January, and Michael S. Dell, the founder, returned to office.

Since then, Mr. Dell has tried to focus a company distracted by disappointing financial results and bad news. He shook up senior management ranks, and has concentrated much of its efforts in China, one of the fastest-growing markets, where Dell’s presence is not as strong as that of Hewlett-Packard or Lenovo.

One of his innovations in the United States was a Web suggestion box open to anyone, called Ideastorm. The strongest response was for a PC that runs the open-source Linux operating system rather than Microsoft Vista. The company announced that it would make such a model.

The accounting problems, meanwhile, are financially damaging to employees. The company said yesterday that it would have to suspend contributions to the Dell stock fund within its 401(k) plan beginning next month because of its failure to make the necessary financial filings. The suspension affects all employees, a company spokesman said.

Dell made the disclosure in a filing to the S.E.C.

The NYT also reports that from the time it started selling cars in the United States 35 years ago, Honda has fostered a reputation for building fuel-efficient vehicles.

Now it is taking a new tack: it wants to join Volvo as an automaker best known for safety.

To get there, Honda is promoting safety as an essential part of its public image. It is offering front and side-curtain air bags and antilock brakes on most of its offerings, from the smallest cars to trucks, emphasizing that buyers need not pay top dollar for such protection.

It has also redesigned the frames of its vehicles to better spread out the impact of a crash. That redesign process, begun this decade in Japan, will be mostly complete this fall across its lineup, when the newest version of its flagship Accord sedan reaches showrooms.

Honda’s campaign, known internally as “Safety for Everyone,” is showing results, with some of the auto industry’s best scores on government and insurance industry crash tests.

Eight of its vehicles, from the small CR-V sport utility to the Odyssey minivan, can claim to be among the safest cars on the road, with five-star ratings from the National Highway Traffic Safety Administration in front and side crash tests, as well as the top rankings from the Insurance Institute for Highway Safety on a variety of crash tests.

Those results exceed the ratings for General Motors, Chrysler, Toyota and even Volvo, the company whose image Honda is striving to emulate. The Ford Motor Company and the Korean automaker Hyundai have a similar number of vehicles that receive those best-in-class scores, though they are not emphasizing safety as much as Honda does in its marketing, including its Web site.

“We want to get the confidence of consumers,” said Tomiji Sugimoto, vice president of Honda Research and Development.

And the company is winning over some buyers. Before he bought his Honda Fit in 2006, Steve Armistead, a database administrator from Vancouver, Wash., said he checked out the company’s results from the traffic safety administration and looked at crash test photos on other Web sites.

He was particularly concerned since his two teenage sons would be driving the Fit, the smallest vehicle Honda sells in the United States.

“Because of the boys, safety is a top consideration for me,” Mr. Armistead, 52, said. “All the crash test ratings I read indicated that this was a very stable, solid car, and considering its size, a relatively safe car.”

Volvo, which has been stressing safety since it began building cars in 1927, is not overly concerned about competition from Honda.

“We have no plans to give up safety to Honda or anyone — we have an 80-year jump on them,” said Dan Johnston, a spokesman for Volvo Cars, who said Volvo was “flattered” by Honda’s efforts.

He and industry analysts note that crash test results are constantly evolving. The Insurance Institute for Highway Safety publishes new ratings every few weeks, as it tests more cars. And regulators are looking for ways to make safety tests more challenging, given that dozens of vehicles have scored the highest marks.

“As the manufacturers have improved their vehicles, the ratings are less relevant, because they all crunch up there in the four and five stars,” said Joan Claybrook, president of Public Citizen, a consumer advocacy group, and a former administrator at the traffic safety agency.

She wants additional testing to focus on pedestrian safety, rear-end crashes and roof sturdiness in case of a rollover — all things that Honda, Volvo and other companies are addressing.

Philip Reed, consumer advice editor at Edmunds.com, which offers car-buying information, said Honda’s focus on becoming known as a maker of safe as well as fuel-sipping cars was a canny way to set itself apart.

“If they can become Volvo, look what it did for Volvo,” he said. “There’s something similar between a focus on the environment and a focus on safety.”

None of Honda’s cars, minivans, sport utilities or pickups are offered with anything bigger than a V-6. It beat Toyota to the hybrid-electric market in the United States, where its Insight, recently retired, went on sale a year before the Prius. (The Prius predates the Insight in Japan, however.)

“There are two important issues in the automobile business: one is the environment; the other is safety,” said Koichi Kondo, a senior managing director at Honda and chief operating officer for North America.

When gas prices jumped over the last few years, many buyers turned to Honda, and its American sales climbed 3.5 percent in 2006, to 1.5 million vehicles. That growth, however, was overshadowed by the 12.5 percent increase at Toyota, which passed Chrysler in 2006 to rank as the country’s third-biggest automaker.

Like Toyota, Honda is poised to grow more. On March 19, it broke ground in Greensburg, Ind., for its fourth American assembly plant, which will build 200,000 compact Civics a year beginning in 2008.

The new factory is about a three-hour drive from Honda’s research and development center in central Ohio, near its manufacturing plants in Marysville and East Liberty.

Honda’s crash test lab here opened in 2003, coinciding with its “Safety for Everyone” approach. It is the company’s second indoor crash test lab and acts as a backup to its primary test center in Tochigi, Japan, the world’s first company-owned indoor crash test site when it opened in 2000. (Volvo has since opened its own indoor lab.)

Measuring a million square feet, the Marysville lab is downstairs from its vast research center.

When tests occur, which is about once a week, “these guys get treated to a little mini-earthquake,” said Frank Paluch, the vice president for engineering.

Honda generally uses this center to test cars primarily sold in the United States, like the white Acura TL sedan it crashed recently. That analysis was meant to measure a crucial feature of the TL called the ACE body structure, which is appearing on all of Honda’s vehicles except the S2000 sports car.

ACE, which stands for advanced compatibility engineering, is meant to spread the force of a head-on crash as widely as possible to give passengers more protection, even when a smaller car hits a bigger car or an S.U.V.

The design distributes the energy from a crash throughout the entire frame of the front end, not just across the bumpers and side panels. In a collision, the ACE body crumples upward, stopping a larger vehicle from crushing it.

“Inherently, when a small car and a large car collide, they’re mismatched,” said Chuck Thomas, manager of Honda’s automotive safety department. “We want the small car and the large car to both deform, not have the large car drive over the small car.”

A crash test shows the theory in practice. An Acura, with two dummies belted into the driver and front passenger seats, was towed by an underground cable along a track, accelerating to 35 miles per hour before it crashed with a loud bang into a specially designed barrier.

The crash was photographed by high-speed cameras and charted by electronic measuring devices that fed pictures and data to engineers sitting in a control room above.

As Mr. Thomas expected, the front end of the Acura was folded upward like a tilted accordion, its headlights broken, its tires badly scuffed.

But the rest of the car was basically intact. The doors remained shut, and the dummies stayed in place, a sign that humans would fare just as well. “It would be very expected that the occupants would open the doors and get out of the car,” Mr. Thomas said.

Mr. Thomas admits there is only so much Honda or any manufacturer can do, short of building tanks, to keep drivers and passengers safe. “It’s hard to design something that will protect you if you hit a tractor-trailer,” he said.

But in the most common crashes, like those that take place on city streets, “There’s no reason you can’t design a car to survive it,” he said.

Mr. Reed at Edmunds said Honda’s safety-focused approach could help dispel Americans’ long-held belief that only big vehicles were safe in crashes.

Philosophically, Honda’s timing could not be better, he said, given that consumers like Mr. Armistead, who could easily justify owning something roomier, are turning to fuel-efficient vehicles as much to save money as to make statements about their personal beliefs.

“I can’t get all those big vehicles off the road,” Mr. Armistead said, “but I cannot join the crowd.”