The Irish Independent reports that Finance Minister Brian Lenihan should cut personal tax credits to bring more low-paid people into the tax net, a leading international think-tank urged yesterday.

The shock recommendation is contained in the latest report on the country's economy from the Paris-based Organisation for Economic Co-operation and Development (OECD).

OECD secretary general Angel Gurria, who unveiled the report in Dublin, also warned Mr Lenihan that the country's borrowing must be reduced quickly, rather than spreading the pain over a longer period as advocated by trade unions.

"The problem is you may not have that time, Mr Minister," he told Mr Lenihan.

"The markets are zeroing in on countries," Mr Gurria added.

The report was published as a ratings agency knocked two points off Ireland's credit rating, citing the severity of the decline in GDP and the exceptional rise in government liabilities.

"The breadth and depth of the country's banking sector problems have substantially increased sovereign risk," agency analysts added.

In its report, the OECD said the Irish economy would return to growth late next year, but recovery would be slow and there was unlikely to be a repeat of the boost which the country received in the late 1980s.

Other recommendations in the 133-page report included:

• Reducing social welfare payments and having more means tests for benefits.

• Cutting public sector pay and numbers.

• Ending the link between public sector pensions and pay.

• Introducing property taxes and ending mortgage relief.

• Scrapping the vast array of housing tax benefits and other tax breaks. The OECD said the projected rise in the national debt was manageable, but would make Ireland particularly vulnerable to rises in interest rates.

"The markets are harsh, and if they do not have confidence in the fiscal policy of the Government, they will make borrowing money more expensive for Ireland," it said.

Mr Gurria said government spending was 50pc higher last year than five years before and clearly this was not sustainable.

"A permanent reduction in the public payroll is an essential element of any fiscal consolidation plan," the report adds.

The OECD advocated bringing more people into the tax net as it said tax revenues and government spending no longer matched. Even if credits are cut, the tax base will also have to be widened with the introduction of a property tax, and an end to many tax breaks, including those for pensions, which it says are the most generous in the 30-nation OECD.

The proposal to cut personal tax credits, which currently stand at €3,660, comes after several statements from Mr Lenihan about how few people are paying income tax.

Two out of five workers paid no income tax last year, and half of all tax came from the one in 30 workers who earn more than €100,000.

The OECD report also found there is a risk of persistent long-term unemployment unless urgent steps are taken to help those who have lost their jobs.

Dangerous

Advocating social welfare cuts, Mr Gurria said it was dangerous if the gap between what can be earned on the dole and in a job became too close.

"It is not a question of reducing the benefits to workers. It is a question of how do you make sure we do not create a disincentive for work and also that we do not create a disincentive for creating new jobs," he said.

The OECD also gave cautious approval for the NAMA plan to stabilise the banking sector. It says nationalisation should be a last resort, but it is clearly worried about the liabilities which the State is taking on.

"Assets should be transferred swiftly (to NAMA) at the appropriate price, with risk-sharing mechanism to protect the taxpayer. Sound and professional management of these assets (loans) to maximise their value will be important."

Fine Gael finance spokesman Richard Bruton TD said the report raises huge questions over NAMA and contained a warning of permanent long-term unemployment due to the lack of a Government jobs plan.

"In the public sector, while pay cuts are inevitable, they should be done in a way where those who accept cuts now will receive a dividend as crucial performance benchmarks are reached in the rationalising of the public services, and in the achieving of a current Budget balance," Mr Bruton said.

Meanwhile, the Government is planning to flush the opposition parties out on how they would cut €4bn from public spending ahead of the Budget.

A special pre-Budget debate will be held in the Dail in a fortnight, three weeks ahead of the Budget on December 9.

Taoiseach Brian Cowen told the Dail no section of expenditure could be immune to possible cuts, including social welfare.

The Irish Independent also reports that the Irish Association of Investment Managers (IAIM) has signalled it is growing impatient with Allied Irish Banks' protracted impasse with Finance Minister Brian Lenihan over its attempts to instal insider Colm Doherty as chief executive.

When asked about the stand-off in an interview with the Irish Independent, the association's new chairman Gerry Keenan said: "The markets want to see a resolution to the issue. It's the board's responsibility to find a solution."

He refused to be drawn on the AIB board's staunch support of Mr Doherty, head of its capital markets division, saying the IAIM "would never have a view on a particular candidate".

But he said the association had a "strong view that the board find a candidate that is acceptable to all stakeholders".

As the minister holds 25pc of the voting power in relation to board appointments as a result of AIB's €3.5bn state recapitalisation this year, the IAIM's first public comments on this issue will be interpreted as compounding pressure on AIB to resume its search for an outside candidate.

Mr Keenan also revealed that the IAIM had warned the chairmen of the country's publicly quoted banks they had a further two years to replace at least three-quarters of board members that were in place at the outset of the financial crisis a year ago.

A number of executive directors have fallen on their swords over the past year of the banking crisis, but the IAIM plans to turn up the heat on non-executive directors.

The Irish Times reports that living standards in Ireland are likely to remain “permanently lower”, the Organisation for Economic Co-operation and Development (OECD) said yesterday in a new report on Ireland.

Lower wages are necessary to restore stability to the economy, the organisation said, while consideration should be given to reducing the minimum wage over time.

Jobseeker’s benefit and assistance payments should also be cut in line with falling prices, according to the OECD’s survey of the economy.

A property tax should be introduced to prevent future property bubbles, while third-level tuition fees should be introduced, supported by a system of loans, it recommends.

The OECD, to which 30 of the world’s developed economies belong, puts forward its view of how the Irish economy can be restored to long-term sustainable growth after a period of “unusually large” economic unbalances.

“The necessary fiscal consolidation, which has begun, should proceed, although there is a balance to be struck with economic activity,” it said. But the ongoing correction in the economy will be “prolonged” and economic activity will not return to boom levels, it added.

The OECD’s report was published on a day in which the Live Register of unemployment benefit claimants fell for the first time in 2½ years.

However, the Opposition, economists and business groups said the fall in the number of claimants was the result of a pick-up in emigration rather than the return of better conditions in the labour market.

The 3,000 fewer claimants in October compared to September eases some of the short-term pressure on the public finances.

But there was more bad news for the Government yesterday as the cost of borrowing by the State increased slightly after credit ratings agency Fitch downgraded the rating on Ireland’s sovereign debt from “AA+” to “AA-”.

“The breadth and depth of the country’s banking sector problems have substantially increased sovereign risk,” said Chris Pryce, director of Fitch. The downgrade puts Ireland’s rating on the same level as Italy and Cyprus.

Minister for Finance Brian Lenihan said the ratings downgrade underlined the importance of taking appropriate action.

“It is extraordinary that the European Commission, the OECD, the IMF all have said there is a clear way out for Ireland and that is to resolve our banking crisis, address our public finances and restore our competitiveness,” Mr Lenihan said.

Among its recommendations, the OECD said public sector wages should be independently reviewed and public sector pensions “overhauled in the light of private sector arrangements”.

The report is in favour of means-testing social welfare benefits that do not currently relate to household income, such as child benefit. Social welfare benefits should be subject to income tax, it adds.

On tax, the OECD said personal allowances should be cut in order to widen the tax base.

Tax reliefs should be limited to the standard rate of tax and capped, while some reliefs should be eliminated.

The Government should consider introducing full individualisation in the tax system, which would entail the abolition of higher standard rate bands for single-income married couples, in order to encourage the participation of women in the labour force.

However, it was not in favour of any increase in indirect tax, such as VAT and excise, saying there was “little scope” to pursue such policies.

As the Irish tax system is biased in favour of home ownership, which leads to more expensive housing and greater volatility, steps should be taken to eliminate this bias, it said.

Mortgage interest tax relief should be reduced, beginning with future borrowers, while a property tax should be used to fund local services, the OECD said, echoing recent recommendations of the Commission on Taxation.

Private housing should be used for people in need of homes and support for people who have lost their jobs to meet mortgage payments “should be made more effective”.

“The aftermath of this housing cycle should be a good time to deal with the poorly designed policies towards housing that contributed to the overheating of the economy,” it states.

Barriers to competition in the electricity market, retail sector, pharmacy sector, licensed trade, the legal professions, bus transport sector and medical professions should be removed, it urges.

The Irish Times also reports that while the OECD secretariat draft their reports, the process is a peer-review one and the final survey reflects the joint conclusions of all 30 OECD countries. Occasionally, the published version is less hard-hitting than the secretariat might wish but that is hardly the case with this one.

The OECD’s analysis is excellent, but their forecasting track record is no better than anyone else’s. For example, their 2006 survey concluded that while house prices might have overshot to some extent, the most likely scenario was “that prices will level out or decline slightly, housing construction will fall back gradually and the market will remain subdued for some time”.

They were more critical of the fiscal policy stance but were still well off the mark, concluding that a prudent approach would involve “returning to balance or running a small surplus”. They have since revised their figures to show that a massive surplus would have been appropriate.

That said, the 2009 survey is probably the best analysis of the Irish situation yet seen. These sentiments were echoed by Brian Lenihan, who described it as a good, realistic, sober document, full of common sense and compulsory reading for anyone who wants to make informed comment on the current situation.

The recommendations are unambiguous. The Government should stick to the budgetary plans it has outlined, even if this will require hard choices. To date, action taken amounts to 5 per cent of GDP; there is another 9 per cent to come, with a third of that slated for the 2010 budget. Unlike the ESRI, the OECD think the deterioration in the budget deficit has been largely structural: ie, it will not disappear as the economy recovers.

OECD secretary general Angel Gurria had an unpalatable message for the trade unions, noting that the markets demand a clear path and can be harsh judges if they perceive any procrastination. If confidence deteriorates, borrowing costs can rise as spreads are marked up.

The tax advice mirrors that of the Commission on Taxation, but without the rider that tax increases should be balanced by reductions elsewhere. This means broadening the income tax base by eliminating reliefs and reducing tax credits, integrating the levies into the main rate structure and introducing both carbon and property taxes. There is no reference to PRSI. Lenihan clearly wants to limit any tax increases in the next budget. The message from the OECD is that they are unavoidable, if not next year, then the year after.

The public sector has overexpanded and must be cut back. Pay should be reviewed independently, taking account of falling private-sector wages. One of the strangest omissions over the past year has been the failure to re-run benchmarking on a proper basis. Though they do not say so explicitly, it is clear the OECD believe that public sector pay has more to fall. Public service numbers, too, must fall.

There is scope to cut resources in the health sector, second-level class ratios should be increased, tuition fees introduced and welfare payments reduced at least in line with prices. Benefits should be taxed. Capital spending should be spared as much as possible, but should fall.

After the budget, the second major task is to get people back to work. There is a danger of institutionalised unemployment among the less skilled and recently qualified so particular attention needs to be paid to reskilling and ensuring that social welfare payments do not act as a disincentive to work. Our activation policies are weak – code for “we do not do enough to get people off social welfare”.

The third challenge is to boost competitiveness. In what is described as a “remarkable degree of flexibility by international standards”, wages and prices are already falling. The OECD expect nominal wages to fall by around 5 per cent but stop short of saying that this is insufficient in the face of competitiveness losses of 20 per cent or more. It appears that even they are daunted by the scale of the challenge that faces us.

The OECD stress how important it is that Nama is independent from political and industry pressures, highlight the drawbacks of nationalisation, even on a temporary basis, and stress the need for an exit strategy, the first time that I have seen this mentioned.

Finally, the regulatory authorities come in for the most explicit criticism yet seen. The OECD call for a more intrusive regulatory regime, including a shift towards a rules-based approach, notwithstanding that this system failed in the US where the subprime issue arose.

Key Recommendations

• The tax system should be reformed to prevent a housing bubble. This should include a property tax and the reduction of mortgage interest relief.

• Third-level tuition fees should be introduced and supported by a system of loans, in order to raise funding and make the system fairer.

• Unemployment benefit claimants should eventually be required to enter work programmes, while lone parents should be required to seek work once their children reach school age.

• Nama should be swiftly implemented, banking regulation should be strengthened, and enhanced rules should include a requirement for banks to hold more capital.

• The level of the minimum wage should be reassessed as it is high by international standards. It should then be reviewed on an annual basis.

• Water charges must be introduced if we are to meet our commitments on water quality and conservation.

• A cut in teachers’ salaries would bring us in line with our European neighbours.

• Future infrastructure projects, such as those in Transport 21, should be rigorously re-evaluated.

The Irish Examiner reports that Cork construction firm John F Supple expects to trade out of its current difficulties, despite recording pre-tax losses of €14.6 million in the 21 months to the end of September 2008.

The company is this month scheduled to pay almost €3.4m to its creditors as part of a survival deal hammered out last year.

This is the second instalment of money due under an arrangement in which it is understood the company has agreed to pay 75c of each euro owed to creditors in three separate stages.

Accounts just filed by the company covering the 21-month period to September 2008 show turnover of €127m and an operating loss of €13.2m.

The directors in their report said the main contracting business continues to trade in a "very challenging" environment.

However, they said they remain confident that these difficulties can be overcome with prudent management.

"We have reduced overheads and are constantly reviewing our costs base to effect savings. We continue to be highly dependent on Government spending to ensure projects proceed and competition for these contracts has intensified significantly," the accounts read.

They also said they have postponed a number of property development projects for the foreseeable future.

"The uncertainty around market conditions continues and the effect NAMA may have on the construction and development sectors in Ireland remains to be seen. "We continue to communicate with our funding banks to ensure that existing facilities remain available to the company during these difficult times," the directors’ report read.

Director at the company, Patsy Supple refused to comment yesterday.

Dividends were paid to shareholders during the 21-month period and a decision was taken in July last year that no further dividends would be paid until the trading difficulties being experienced by the company are overcome.

There were 101 people employed at the company at the end of September 2008 and staff costs in the period were almost €16m.

An exceptional item is listed in the accounts, which refers to the provisions against work in progress and development land of €19.5m. This, it said, is partially offset by the money owed to creditors.

The directors said it was appropriate to prepare the financial statements on a going concern basis. They said they have reviewed financial projections covering a period to December 2009 and on the basis of this review of resources, believe that the company will have sufficient resources to continue.

In an "emphasis of matter" the company’s auditors, Deloitte and Touche said that in respect "solely" of the limitation of its work relating to the assessment of the appropriateness of the going concern basis of preparation of the financial statements they "have not obtained all the information and explanations we considered necessary for the purpose of our audit".

The Financial Times reports that offshore financial centres have a beneficial economic impact on neighbouring industrialised countries, according to a study commissioned in a bid to counter growing political pressure on tax havens.

The study said “a large body of economic research over the last 15 years” contradicted the popular view that offshore centres erode tax collections, divert economic activity and otherwise burden nearby high-tax countries.

The study was commissioned by STEP, a London-based professional body for wealth advisers, who make extensive use of offshore jurisdictions. It was published in advance of this weekend’s G20 meeting in St Andrews, where political leaders are set to discuss how to help developing countries secure the benefits of exchanging tax information.

A report to the Treasury, published last week, cited similar research showing that foreign investors were able to lower the “hurdle rate” required to invest in high tax jurisdictions by using nearby tax havens. It said “the UK might be overall better off with them [Crown Dependencies and Overseas Territories] in place on the grounds that their existence allows more investment to flow to the UK than would otherwise be the case”.

Professor James Hines of the University of Michigan, the author of the STEP study, said tax havens “play the important role of pressure valves”, allowing big countries to impose higher taxes on domestic businesses without deterring international investors or triggering “beggar thy neighbour” tax competition.

For every 1 per cent more investment by a US business in a tax haven, there is 0.5-0.7 per cent more sales and investment growth in neighbouring industrialised countries, the study said. Similar results had been drawn from studies of European businesses and those elsewhere, including developing countries.

Prof Hines said his arguments were the “prevailing orthodoxy” among US economists. But Professor Joel Slemrod, another University of Michigan expert on tax havens, has argued they are “parasitic” on the revenues of bigger countries and the abolition of some of the larger ones would leave all countries better off.

The findings are likely to be disputed by groups such as Tax Justice Network, which argues that havens undermine markets, promote crime and threaten democracy by encouraging tax competition.

The study also said offshore centres played a “key role” in the international financial system, improving the availability of credit and encouraging competition in domestic banking.

The FT also reports that Germany and Russia reacted furiously to General Motors’ surprise decision to keep Opel rather than sell it, throwing up fresh uncertainty about the future direction of one of Europe’s biggest carmakers.

The news that GM’s board had abandoned the sale of Opel/Vauxhall to Canada’s Magna and Russia’s Sberbankalso led to a schism among the carmaker’s workers, with UK employees celebrating while Germans said they would start warning strikes on Thursday.

Jürgen Rüttgers, premier of North Rhine-Westphalia state, where GM proposes closing a factory, said: “General Motors’ behaviour shows the ugly face of turbo-capitalism. That is completely unacceptable.”

GM’s decision pitches the Detroit-based company into a new confrontation with the German government over Opel. At the heart of the controversy is whether Berlin would allow Opel to go bankrupt or step in to support GM financially.

GM said that it would need about €3bn in financing to restructure Opel and that it would ask European governments for money. But Berlin, which was offering Magna €4.5bn ($6.6bn) in state aid, is instead asking GM to pay back a €1.5bn bridging loan it gave to the US carmaker. GM said it had paid back €600m and was willing to repay the rest.

Rainer Brüderle, Germany’s new economics minister, said: “The behaviour of General Motors towards Germany is totally unacceptable.” However, some state governments in Germany with Opel factories hinted they could support GM’s move.

People close to GM admitted there was a “certain kind of brinkmanship” involved in its decision to retain Opel.

“If GM cannot finance it, then they will go for a controlled insolvency with a much more brutal restructuring and even more plant closures,” said one.

Vladimir Putin, Russia’s prime minister, also reacted angrily. He was quoted as saying Magna and Sberbank would conduct a “legal analysis” of the matter. But Magna itself said it accepted GM’s decision.

GM’s move reflects the determination of its new board to present a company that is growing as it aims to come out of government hands and back on to the stock market as early as next year.

“The choice was between a local US carmaker and a global one with Opel,” said Philippe Houchois, analyst at UBS.

John Smith, GM’s chief negotiator, hinted last night that plans to close two German factories could be revised, adding that a restructuring plan would be filed very soon.

Mr Smith said of Berlin: “If they liked the Magna plan, they will like the GM plan.”

The New York Times reports that in 2005, Michael S. Dell’s namesake company was getting pounded. His competitors were selling personal computers and servers built on cheap, popular and powerful chips from Advanced Micro Devices, while Mr.Dell had stuck loyally with slower chips fromIntel.

In an e-mail note to Intel’s chief executive, Paul S. Otellini, Mr. Dell threatened to switch to A.M.D. “I am tired of losing business,” Mr. Dell wrote. “We are losing the hearts, minds and wallets of our best customers.”

Mr. Otellini reminded Mr. Dell that Intel had paid Dell more than $1 billion in the last year. “This was judged by your team to be more than sufficient to compensate for the competitive issues,” he wrote. Dell delayed buying A.M.D. chips, and Mr. Otellini said in a later e-mail message to a colleague that Dell was “the best friend money can buy.”

Such payments to PC makers, along with other aggressive business tactics, are at the heart of the antirust lawsuit filed against Intel on Wednesday by New York’s attorney general, Andrew M. Cuomo. Mr. Cuomo’s case — the first antitrust charges against the company in the United States in more than a decade — follows similar actions by regulators in Europe and Asia.

According to Mr. Cuomo’s lawsuit, Intel, the world’s largest chip maker, has for years used large rebates and co-marketing arrangements to talk Dell and other manufacturers into sticking with its products rather than increasing their business with A.M.D., a much smaller chip maker.

As the supplier of about 80 percent of the central chips that power PCs and servers, Intel had monopoly power, which it abused, according to Mr. Cuomo. “Intel has used illegal threats, coercion, fines and bullying to preserve its stranglehold on the market,” he said at a news conference Wednesday. “We intend to stop them.”

An Intel spokesman, Chuck Mulloy, said the company had done nothing wrong. “Neither consumers, who have consistently benefited from lower prices and increased innovation, nor justice are being served by the decision to file a case now,” he said.

Intel, based in Santa Clara, Calif., is no stranger to antitrust controversy. The company has spent the last five years defending itself against antitrust allegations, first in Asia and then in Europe.

In May, the European Commission hit Intel with a record $1.45 billion fine for antitrust violations, which the company is appealing. Intel also faces a four-year-old antitrust lawsuit filed by A.M.D. in Federal District Court in Delaware and a continuing investigation by the Federal Trade Commission.

Although Intel has faced various antitrust claims for two decades, the cases against it have picked up steam in recent years because of developments in the chip industry.

In 2003, A.M.D., Intel’s longtime nemesis, began selling a new line of chips widely regarded as superior in design and performance to Intel’s products. The chips were good enough to lift A.M.D. from the PC market into the higher-profit server computer market for the first time and begin selling to Hewlett-Packard, I.B.M. and Sun Microsystems.

It took Intel about four years to come up with chips that matched or surpassed A.M.D.’s products in performance.

While A.M.D. did well both in sales and market share gains during that period, the company’s top executives have long argued that it could have sold far more products had Intel not used strong-arm tactics to blunt its advantage.

The lawsuit, which was filed by Mr. Cuomo in the Delaware court, stretches beyond the interests of A.M.D., which is building a $4.2 billion plant in Saratoga County in upstate New York through a spinoff company, GlobalFoundries. Mr. Cuomo argues that Intel’s behavior curtailed innovation in the industry and forced consumers and businesses to pay higher prices for computers.

Under federal antitrust law, states have the power to bring charges independently of the federal government. The F.T.C. and other states may file similar cases, much as in the government’s antitrust case against Microsoft a decade ago.

The major complaints surrounding Intel concern its use of rebates and marketing dollars to keep customers. The New York suit argues that Intel executives threatened to take away such incentives from customers if they did more business with A.M.D.

In addition, the lawsuit contends that if businesses were close to buying A.M.D.-based computers from a company like H.P. or Dell, Intel would jump in to help the computer makers sell Intel-based machines at a large discount.

Over all, the hardware makers often became dependent on Intel’s incentives to keep their computer businesses profitable, making them reluctant to make a meaningful shift to A.M.D., the lawsuit said.

Communications cited in the lawsuit show that Dell executives turned to Intel for payments to help them meet or surpass Wall Street’s expectations for quarterly financial results. When Dell finally decided to make products with A.M.D. chips, Intel reduced its chip rebates for the company by $600 million, according to the suit.

The suit also contends that Intel paid I.B.M. to halt the production of a server based on A.M.D.’s chips.

Rebate payments and other incentives provided to customers fall into a murky area of the law, according to antitrust scholars. Intel’s critics must show that it went beyond the typical actions that one would expect from a company trying to protect its business.

“A lot of what they are talking about here sounds nefarious, but others would look at it and say that is how markets work,” said John E. Lopatka, a professor and antitrust expert at Pennsylvania State University’s Dickinson School of Law.

Harry First, a professor at New York University’s School of Law, said Delaware was an odd venue for Mr. Cuomo to pick for the lawsuit against Intel. “I assume they filed there because A.M.D.’s litigation against Intel is pending there,” he said.

Piggybacking on A.M.D.’s lawsuit could make sense since most of the current cases against Intel share much of the same evidence. More than 200 million pages of documents have been exchanged between the parties in A.M.D.’s case against Intel.

Antitrust experts following Mr. Cuomo’s actions said that both A.M.D. and I.B.M. — which is based in Armonk, N.Y., and competes against Intel in the server chip market — have invested billions of dollars in chip manufacturing plants in New York.

Keith N. Hylton, a professor at the Boston University School of Law, said that Mr. Cuomo could benefit politically by taking such a prominent stand on behalf of local workers and consumers. “An attorney general is understood to be an aspiring governor,” he said. “They are politicians, and they want to be on the gravy train for big cases.”

During the news conference, Mr. Cuomo said that thwarting Intel’s abusive actions was important to consumers and businesses worldwide. “It is not just about New York,” he said.

The NYT also reports that now is the time of year when a Wall Streeter’s fancy turns, not so lightly, to thoughts of bonuses.

Inside major financial companies, the annual rite of tallying bonuses is about to begin, with a sense of relief and even elation that would have been unthinkable only a year ago. After all those federal bailouts, many banks are turning handsome profits. Top producers are looking forward to blowout paydays once again.

In financial circles, the question on everyone’s mind is this: Just how big will this payday be?

The answer, it seems, is extremely big — perhaps the biggest industrywide since 2007, at the height of the bubble, according to a study released on Wednesday by the pay consultant Johnson Associates.

The annual report, a closely watched signpost for the bonus season, projected that the financial industry payouts would be up 40 percent from 2008, when they plunged in the midst of the financial crisis. In 2008, Wall Street handed out nearly $20 billion in cash awards and billions more in stock and other incentives to employees based in New York.

What is most remarkable about the estimate, compiled by Johnson Associates, is how quickly pay is expected to rebound for traders — Wall Street’s current kings and queens of ka-ching.

For people who trade bonds, commodities and currencies, bonuses are expected to soar as much as 60 percent, to around their pre-crisis levels. A typical senior fixed-income trader can expect a total pay package of about $930,000 in cash and stock, compared with a package last year of about $695,000. Paychecks for stock and derivatives traders are likely to jump by half that much. Bonuses for investment bankers, by contrast, are projected to rise 15 to 20 percent. Star performers could see their paychecks surge even higher.

Whatever the actual numbers, the bonuses — most of which will be calculated between now and the end of the year and paid out in early 2009 — are bound to be controversial given the hard economic times many Americans are facing and the resentment directed at the financial industry.

The Obama administration’s special pay master, Kenneth R. Feinberg, has restricted pay at the seven companies that received extraordinary government support, but most of the industry is outside his purview. Big banks are grappling with changes to their bonus systems, which regulators claim may have encouraged employees to take excessive risks. Many banks are planning to increase the percentage of bonuses paid in the form of stock or options.

“It’s going to be a political and optical problem for the banks,” said Michael S. Melbinger, an executive compensation lawyer at Winston & Strawn.

But while the economic fortunes of Wall Street and Main Street have diverged, so too have the fortunes of certain employees within the financial industry. This will be an unusually lopsided year for bonuses. While traders are looking forward to fat bonuses, payouts for people working in asset management, corporate and retail banking and the insurance businesses are expected to be flat or even down, according to the study.

Given the decline in the once-booming mergers and acquisition business, bonuses for certain dealmakers could fall 10 to 15 percent. And the once-gilded paychecks of hedge fund managers are expected to decline 15 to 25 percent. Private equity executives will be among the hardest hit, with their year-end bonuses falling 20 to 25 percent as they struggle to sell many of their investments.

“This is a year of two different worlds,” said Alan Johnson, of Johnson Associates. “It’s not a broad-based recovery.”

The firm’s study by no means provides a complete view of bonuses. For example, it did not examine specific dollar amounts for individual employees; instead, it looked at the projected increase to the bonus pool for several different financial businesses. In addition, it looked only at year-end bonuses and long-term stock awards, leaving aside large salary increases and option grants that several big banks made earlier this year. “Main Street is ticked off that Wall Street is making all this money,” said Joseph E. Bachelder, a compensation lawyer.

Still, after traumas of the last year exposed how poorly many banks managed their risks, many Americans might be relieved to know that experienced risk managers are a hot commodity on Wall Street. For them, according to the Johnson study, annual bonuses are expected to rise 40 percent this year.