The Irish Independent reports that a surge in consumer spending and a hike in exports will spark rapid recovery in the economy, three leading experts predicted last night.

The head of the country's biggest think-tank said there would be a modest lift in the economy in 2011 followed by a period of "quite rapid growth".

ESRI chief economist John FitzGerald said: "We will see a vigorous recovery in 2012." He added that the economy could expand by as much as 5pc a year between 2012 and 2015.

Late last night, his comments were echoed by Dr Alan Ahearne, adviser to Finance Minister Brian Lenihan.

He claimed lower costs were already "kickstarting growth". And in a special report, Bank of Ireland economist Dan McLaughlin forecast that a substantial increase in exports in 2012 would help a recovery.

The optimistic outlooks represent the first definitive sign that a recovery may not be far off and will come nearly two years since the country dipped into recession.

However, Dr FitzGerald warned that taxpayers should brace themselves for another tough Budget next year.

He said there was a need to raise taxes further in the next Budget to cement a recovery in the country's financial position.

The taxpayer was also going to "lose a bomb" on the billions of euro already injected into Anglo Irish Bank, he warned.

Up to €2bn of that will have to be put into troubled Irish Nationwide once it transfers loans to the new National Asset Management Agency (NAMA).

Mr FitzGerald, research professor at the Economic and Social Research Institute, said that 2011 would still be relatively slow in economic terms, with modest growth being led by the export sector.

But then it would grow by 5pc a year until 2015. And after that, he predicted a return to a "boring", traditional European-style growth rate of 3pc in the long term.

Speaking at the 'Checkout' annual retail conference in Dublin yesterday, he said a short-term boost to the economy was likely to kick in during 2012 as consumers once again started spending money. Workers have been pouring money into savings accounts, building financial security nets in case they lose their jobs as the employment rate hit 12.5pc.

Consumers have also been reducing their debt levels as the economy entered its deepest contraction since the 1930s. Mr FitzGerald described them as being "scared out of their wits".

"At some point we're going to see savings coming back down and at some stage we'll run out of empty apartments in Dublin and Cork and there will be a return to significant building," he added.

His optimistic outlook was further tempered, however, by a stark prediction that the last Budget was unlikely to be the final dose of strong fiscal medicine workers would have to endure.

Mr Lenihan needed to deliver one more "pretty tough Budget", he said.

Dr Ahearne, the minister's adviser, said a number of factors gave rise to optimism. He said there was a 5pc improvement in unit labour costs since the autumn. "This is already kickstarting growth. We are starting to gain market share but we need to do more as we lost our competitiveness during the boom years," he said.

Engine

He said that export-led growth would be the engine for the recovery but that it would probably be 2011 before any real impact would be felt, after years of over-dependence on house building. "We are on the road to recovery but it will be a bumpy road. It is still an uncertain world and the financial markets are fragile. Unemployment is still increasing, although the rate has slowed down," he said.

Although Mr FitzGerald believes the Government will eventually lose large sums of money on its expected recapitalisation of up to €10bn in Anglo Irish Bank, he believes it will make a positive return on its combined €7bn recapitalisation to date of Bank of Ireland and Allied Irish Banks.

Mr FitzGerald also believes unemployment will probably continue to rise until the end of this year, having hit 12.5pc in December with nearly 427,000 people on the live register.

"The question is how rapidly it will come down. There will be problems.

"A lot of people who lost their jobs were relatively unskilled," he said. He added it would be "a challenge" to find jobs for many of those workers.

The Irish Independent also reports that a senior judge expressed astonishment that AIB handed out €550m loans to five companies formerly controlled by Liam Carroll with only a letter and the deposit of title deeds as security.

Mr Carroll's biggest lender yesterday moved to protect its loans -- which are in default -- by securing court orders aimed at ensuring the strength of its security.

But High Court judge Mr Justice Peter Kelly said that it was "astonishing" and "extraordinary" given the vast sums involved that AIB's only security for the borrowings was letters of undertakings from a solicitors firm and the deposit of title deeds.

The bank's security was described by the judge as "fairly fragile" and "a far cry from a legal mortgage".

The judge told lawyers acting for AIB that it appeared from court documents that it had never inspected the title to the properties or conducted an investigation into the title.

He also highlighted a series of errors whereby one of Mr Carroll's companies, Danninger, was identified as the owner of various properties when in fact it was owned by other companies within the Zoe group.

Mr Justice Kelly said it was "fortunate" for AIB that the Zoe companies acknowledged the errors and that the intention of the legal undertakings -- to hold on trust the title deeds for AIB -- was to create an equitable mortgage over the portfolio of commercial and residential properties, most of which were located in Dublin.

Yesterday, AIB defended the quality of its security. The bank said that it wanted to appoint receiver William G O'Riordan over those properties in the first stage of a process aimed at recovering the loans which were drawn down subject to a facility agreement in March 2009.

Mr Justice Kelly was told by lawyers acting for the official liquidator for Vantive Holdings and Morsten Investments -- the two key funding companies in the Zoe group -- that issues might arise if there was a defect in the bank's security.

The liquidator is not a party to the case and must decide by Friday morning whether it wants to be joined in the case as AIB's application will be heard on Friday morning.

In court documents, solicitors for AIB said other financial institutions had appointed receivers over various other properties owned by Zoe companies.

Counsel for AIB said the bank was only seeking to appoint a receiver at this stage and, given the state of the property market, would not be seeking to sell properties now.

Mr Justice Kelly said, for such a huge amount of money involved, it was "extraordinary" that security was based on solicitors' letters of undertaking.

He said this was "fragile" security and in some instances the letters mis-stated the name of the Zoe company that owned the property involved.

Confused

Given the large number of companies in the Zoe group, it was understandable people got confused, he added.

He made the remarks when admitting to the Commercial Court's list the proceedings by AIB against five Zoe companies: Danninger, Eppo Developments, Fabrizia Developments, Oze Construction and North Quay Investments Ltd.

The bank demanded repayment of loans last October after key companies in the Zoe group were refused court protection.

It is moving under a facility agreement of March 2009 made between it, the five companies and Vantive under which AIB continued loan facilities of some €528m to the five companies and also agreed to make available additional loans.

The bank claims €550m is now owed and it has good security for that amount on foot of letters of undertaking from solicitors for the companies, Cathal N Young, O'Reilly & Company, and the deposit of title deeds.

The Irish Times reports that various partners in Bloxham stockbrokers are facing court claims for almost €10 million arising from allegedly negligent advice to invest in a bond which later fell by more than 97 per cent in value.

Two leading solicitors yesterday claimed they had suffered combined losses of more than €1.4 million over investment in the bond.

Their claims come after the Solicitors Mutual Defence Fund, the main insurance body for solicitors with 3,500 members, last month brought proceedings against Bloxham’s over the same bond, alleging its ability to indemnify solicitors had been affected by more than €8 million losses suffered after the bond’s value fell.

Mr Justice Peter Kelly yesterday transferred to the Commercial Court list the separate proceedings by LK Shields Solicitors and by Maurice Curran, a retired solicitor and former chairman of the Mutual Defence Fund, and his wife Noelle.

The various actions over the bond are to run together.

The judge was told that some of the Bloxham defendants are seeking indemnity on grounds they were not partners at the time of the alleged negligent advice in 2005.

In the Shields action, the firm claims its approach to risk was consistent with that of the Mutual Defence Fund of which Laurence K Shields, a partner in the firm, is currently chairman.

It is claimed Mr Shields had close contact with Bloxham’s in his capacity as chairman and relied on advice from Bloxham’s when deciding in January 2005 to invest €1 million in the same bond, which later fell by 97 per cent in value.

In the Currans’ action, Mr Curran claims that relying on advice from Bloxham’s, he and his wife had also in January 2005 invested €400,000 in the bond. It later emerged the bond was not suitable for their investment requirements and the investment had fallen by 97 per cent, he claims.

Mr Justice Kelly was told last month that Bloxham’s is suing Morgan Stanley in the UK for breach of contract relating to the bond but that claim is limited to €42.75 for every €100 invested in the bond.

In an affidavit in the Mutual Defence Fund case, Mr Shields said Bloxham’s expressly represented to the fund in January 2005 that the bond was a suitable investment issued by Dresdner Bank. The fund learned in 2008 the bond was not issued by Dresdner and was not suitable.

The fund was also unaware in 2005 there was a “call option” exercisable by Morgan Stanley, which compromised the integrity of the bond as a secure investment vehicle, he said.

The Irish Times also reports that the State’s main banks have pressed developers to take advantage of an uplift in the UK property market to sell land and investment assets to recoup loans before they are sold to the National Asset Management Agency (Nama) over the coming months.

A number of developers have been encouraged to put land in the UK, including some prime sites in London, on the market as the banks believe they will receive a better deal than if they were to sell the loans at a discount to Nama.

One high-profile property developer who expects to be among the second or third wave of top borrowers moving to Nama said he had been encouraged to sell a prime UK site in advance of the Nama loan transfers.

“The banks are cherrypicking assets – they believe they can get a better price on the open market than from Nama,” he said.

Another prominent developer, who will be among the top borrowers moving to Nama, said the banks were concerned by the potential discount to be applied.

This was leading to greater pressure on developers to sell certain lands, he said, which would result in their equity being wiped out.

Developers were instead choosing to wait for Nama in the belief that they may recover some of their equity by developing and selling assets over time, he said.

“The banks want it all [the proceeds from the sale of lands] – so there is nothing in it for the developers to sell right now,”he said.

He warned that Nama had legislative power to reverse land sales but said this could prove difficult with transactions in the UK.

Both AIB and Bank of Ireland said there was no formal strategy being pursued where they were urging developers to sell land and investment assets to recover loans before Nama.

“There is no sense that there is an overarching strategy going on,” said a spokesman for AIB.

“I don’t think there is any broad strategy,”said a Bank of Ireland spokesman. This was “normal business activity”, he said, and there was nothing to stop banks pressing customers to sell property to recoup loans as an alternative to selling them to Nama.

The UK property sector has enjoyed a bounce in values and activity since last summer.

British commercial property accounted for the largest share of new investment across Europe, according to property consultancy CB Richard Ellis.

Property investment in the UK rose 64 per cent in the second half of last year compared with the first six months of the year.

Nama chief executive Brendan McDonagh said this month that there was no reason to change the Government’s 30 per cent estimate on the average discount to be applied by the agency on loans, as recovery in UK and US property prices was offsetting declines in Ireland.

One banking source outside the two large banks said lenders were following “an understandable desire to take advantage of an increase in prices”, but warned that sales may lead to increased concentration of assets for Nama.

“It may not suit Nama because these assets may be generating income,” he said.

Some 20 per cent of the €80 billion in loans to be acquired by Nama are located in Britain.

The Irish Examiner reports that the Government will today announce an inquiry into the causes of the banking crisis, but a significant portion of the investigative work is expected to take place behind closed doors.

Finance Minister Brian Lenihan will bring proposals for an inquiry to a meeting of Cabinet before informing the Dáil this afternoon of the format which his colleagues have agreed upon.

Mr Lenihan and Taoiseach Brian Cowen held separate meetings with Green Party leader John Gormley yesterday as the coalition partners continued their discussion of the issue.

The Greens have demanded a "public element" to the inquiry, and a spokesman for Mr Gormley said "progress" had been made at the meeting with Mr Cowen.

However, a spokesman for Mr Cowen refused to comment on the meeting, saying: "We never discuss what he says with his ministers."

Fine Gael and Labour have claimed Mr Cowen is reluctant to hold a full public inquiry because of the spotlight it would shine on his four-year tenure as finance minister.

And the Opposition reacted sharply last night to speculation that the bulk of the investigative work would be done behind closed doors by a commission of inquiry, followed by Oireachtas hearings which would publicly consider the commission’s report.

"It was decisions made behind closed doors that caused the crisis in the first place," said Labour leader Eamon Gilmore.

"The pursuit of the truth must be done in the open.

"Any attempt to hold this inquiry behind closed doors, with a few token public sessions, will not be acceptable to the taxpayers who have been exposed to a potential risk of more than €400 billion as a result of the bank guarantee, who have had to cough up €11bn so far to bail out the banks, and who face an as yet unknown final bill."

Mr Gilmore said his party accepted that any probe would require an initial private stage where investigators carried out preliminary work to form the basis for the inquiry.

However, he stressed that all hearings and taking of witness evidence would have to be carried out in public.

By contrast, a commission of inquiry would hear witnesses’ testimony in private before producing a report for publication – which the opposition says would be unacceptable in this case.

Meanwhile, Fine Gael TD George Lee said trust in banking could not be restored "behind locked doors".

The Financial Times reports that Alistair Darling will order ministers this week to start work on the most swingeing public spending review in a generation, as officials acknowledged that some departments could see cuts of about 16 per cent over three years.

The chancellor wants to use his pre-election Budget to show voters that Labour is serious about attacking the £178bn deficit, in a move which might reassure the markets but concern those in the Labour party anxious to avoid discussing cuts.

Liam Byrne, Treasury chief secretary, will write to ministers in the next few days telling them to propose ideas for savings, in what is effectively the first act of an eyewatering 2011-14 public spending round.

Mr Darling told the Financial Times that halving the deficit in four years was “non-negotiable” and that he intended to use his Budget – expected in March – to give more detail on where the axe will fall.

Labour has promised to protect health, education, police and overseas aid budgets, prompting the Institute for Fiscal Studies to predict real terms cuts of 16 per cent for all other departments.

Mr Darling declined to deny reports that the Treasury had put the figure at 17 per cent. “The Treasury has hundreds of forecasts and hundreds of different permutations,” he said.

However, government officials do not dispute the range of estimates.

The chancellor has been stung by criticisms that he has given no idea of how he would achieve such deep cuts. He has asked Mr Byrne to crack the whip over spending ministers to start identifying areas for savings.

Mr Byrne will therefore ask ministers to highlight efficiency savings under the so-called public value programme, which has so far identified savings of £15bn, and on further cuts to quangos.

Ministers will also be told to rank spending priorities, while Gordon Brown will call together ministers next month to assess progress in finding savings. “It’s the kind of thing you do at the start of a spending review,” one government official said.

Mr Darling wants work to begin now so that new departmental spending totals for 2011-14 can be set by the autumn. If the Conservatives win the election, they would inherit some of that work, although they have pledged to cut more deeply and quicker.

The chancellor argues that the Tories would damage a fragile economy by cutting spending before the recovery is assured, claiming that by bringing forward savings to the next financial year they would have to take £25bn-£26bn out of the economy.

Meanwhile, Mr Darling used the interview to “emphasise the importance of London as a financial services centre”, insisting that the 50 per cent supertax on bonuses this year would not be repeated. He also hinted that a future Labour government would eventually seek to reverse the new 50p top rate of income tax, saying it was not introduced as “a matter of ideology” but to counter the “extraordinary” conditions affecting the public finances.

While confirming he would not follow Barack Obama in announcing a backward-looking bank levy, he said Britain was leading calls for a globally agreed solution to “insure against the possibility of bank failures in the future”.

That could include the Tobin tax on financial transactions promoted by Mr Brown last autumn or an insurance levy on banks, also suggested by the prime minister and now endorsed by George Osborne, shadow chancellor.

But he admitted the international response at times seemed disjointed. “It’s terribly important that we have a coherent global approach,” he said.

The FT also reports that property sales rose by three quarters in China last year as easy credit continued to fuel buyers’ appetite in the bubbling market.

Full-year sales increased 75.5 per cent from a year ago to Rmb4,399.5bn ($644bn), with residential sales jumping 80 per cent, according to the National Bureau of Statistics on Tuesday. In terms of floor areas, total sales rose 42.1 per cent to 937m square meters last year.

The new data came after China said home prices rose 7.8 per cent in December from the same period a year earlier, the fastest growth in 18 months, despite Beijing’s attempts to tame soaring prices.

China has announced a series of measures , including a nationwide property sales tax, to slow the red-hot market. Demand has been driven mainly by a huge surge in new loans from state-owned banks ordered to support the country’s economic growth.

Last year, total new loans more than doubled to Rmb9,590bn. In Shanghai, banks approved Rmb99.6bn in new mortgages in 2009, 17 times higher than Rmb5.8bn reported a year earlier, according to Bloomberg.

Developers have warned of a bubble repeatedly, while analysts and officials have started to talk about the serious impact on the financial system when prices begin to fall.

“I think the Chinese government is already taking a lot of measures. I can’t imagine it will take too hard a stance though because the property market is a big part of the Chinese economy,” said Lina Wong, managing director at Colliers for east and south-west China.

“Of course the government wouldn’t want prices to go too fast but they definitely don’t want to kill the market because [the property market] accounts for about 8 to 10 per cent of gross domestic product.”

The New York Times reports that Google e-mail accounts of at least two foreign journalists in Beijing have been compromised, a journalists’ advocacy group in China said on Monday, adding that hackers changed Gmail program settings so that all messages would be forwarded to unfamiliar addresses.

The journalists apparently discovered the irregularities after Google announced last week that hackers had tried sophisticated attacks on its security infrastructure. The company suspects that those attacks originated in mainland China.

Google also said that two Gmail accounts had been compromised, adding separately that the e-mail accounts of dozens of people pressing for human rights in China had been hacked.

In response, Google said last week that it would talk to the Chinese government about ending self-censorship of its Chinese-language search engine, Google.cn, and that the company could close down or curtail its operations in China.

The two foreign journalists were among a large number of Gmail users in China who discovered that their accounts had been compromised after Google made its announcement. In many cases, it was unclear when the hackers had broken into the accounts.

The attacks on e-mail accounts were separate from those weeks ago aimed at the security infrastructure of Google and more than 30 other companies and entities, most of them based in Silicon Valley in California.

One of the two journalists is a television reporter in the Beijing bureau of The Associated Press, which has one of the largest foreign news operations in China. E-mail messages in the reporter’s account were being forwarded to an e-mail address that the reporter did not recognize. The reporter said that other people the reporter knew in Beijing had experienced the same kind of attack, though none of the forwarding addresses were the same.

It is not known who was behind the e-mail attacks or whether the Chinese government, whose security forces sometimes closely monitor the activities of foreign journalists, had any involvement.

“We remind all members that journalists in China have been particular targets of hacker attacks in the last two years,” the journalists’ advocacy group, the Foreign Correspondents’ Club of China, said in its announcement concerning the compromised Gmail accounts.

Several human rights advocates in China said last week that their Gmail accounts had been compromised, among them Ai Weiwei, an artist, and Teng Biao, a lawyer.

People in the United States briefed on the investigation of the infrastructure attacks said Google was exploring all options, including the possibility that employees in China or elsewhere could have been involved. But that possibility did not appear to be central to the inquiry.

The people noted that the attacks were highly sophisticated and probably would have been successful whether or not Google had employees in China.

Dan Brody, Google’s first employee in China, who now heads an Internet media investment company in Beijing, said speculation about moles in Google China’s engineering department, while plausible, remained wholly unsupported.

The NYT also reports that Kraft Foods has reached a tentative deal for a friendly takeover of Cadbury of Britain, agreeing in principle to pay about $19 billion in cash and stock for the confectioner, people briefed on the matter said on Monday.

Barring any last-minute complications — these people cautioned that the talks could still fall apart — the deal would create a global food giant that would unite Kraft and its Oreo cookies and Ritz crackers with Cadbury and its Trident gum and Dairy Milk chocolates. Together, the two companies would have more than $50 billion in revenue and a big presence in markets globally.

Over the last decade, food companies have sought to gain scale by combining with each other, most recently with Mars buying the Wm. Wrigley Jr. Company in 2008 for $23 billion.

The tentative deal for Cadbury would end a four-month battle for control of the British candy maker, one in which Cadbury executives accused Kraft of showing “contempt” with an undervalued offer.

Under the terms of the proposal, Kraft will pay 840 pence ($13.70) for each Cadbury share, while Cadbury will pay out a special dividend of 10 pence a share. The offer is about a 5 percent premium over Cadbury’s closing share price of 807.5 pence on Monday. The majority of the increase was in the cash component, which was raised to £5 a Cadbury share, from £3, a person briefed on the matter said.

The agreement is expected to be announced as soon as Tuesday, this person said, which is the last day Kraft can raise its offer under British takeover rules.

Spokesmen for Cadbury and Kraft declined to comment on Monday.

The deal will draw to a close an often acrimonious takeover battle between the two food companies, one that began with Kraft making public an unsolicited $16.7 billion bid for Cadbury in early September. The Cadbury management quickly derided the offer as too low and dismissed the prospect of being absorbed into what it called a slow-growing food conglomerate.

Most of Cadbury’s major shareholders resisted Kraft’s original offer, with just 1.5 percent having accepted by an earlier January deadline. Many are likely to be swayed by a recommendation from Cadbury’s board now that Kraft has addressed a common complaint by raising the cash portion of its bid.

A takeover of the 186-year-old Cadbury, especially by an American giant like Kraft, will most likely send shudders throughout Britain. Politicians and unions have pointed to both a loss of jobs — the Unite labor union has estimated that as many as 30,000 jobs could be lost — and of national pride.

Cadbury has argued repeatedly that it would prefer to remain independent, pointing to faster-than-expected success in its turnaround program. But its executives have acknowledged that Kraft’s bid put the company in play and they would consider any offer made at the right price.

From the beginning, speculation mounted among investors that another bidder could step in, forcing Kraft to raise its original offer. Representatives for Cadbury have held talks with Hershey, the American company that Cadbury had viewed as a preferable merger partner, according to people briefed on the matter.

For Hershey, buying Cadbury would prevent it from being relegated to a mostly domestic company. Hershey moved closer to making a bid in recent days, lining up more than $10 billion in financing, these people said.

Hershey had been waiting for Kraft to unveil its final offer on Tuesday before it made its final decision on a bid, but analysts have said that Hershey would most likely be unable to top the much larger Kraft in a bidding war. Other potential suitors, including Nestlé of Switzerland and Ferrero of Italy, dropped out.

Despite Kraft’s strong desire to gain control of Cadbury, its chief executive, Irene Rosenfeld, vowed to keep the company disciplined in its bidding and to maintain its investment-grade credit rating. Still, Kraft began raising its original offer earlier this month, increasing the cash portion of its bid after selling its North American frozen pizza business to Nestlé for $3.7 billion. Ms. Rosenfeld met with Cadbury shareholders in London last week to solicit their opinions.

Others have sounded notes of caution. Warren E. Buffett, whose Berkshire Hathaway is Kraft’s largest shareholder, delivered an unusually public admonishment, warning Kraft to avoid overdiluting its shareholders by issuing too many new shares.

William A. Ackman, who runs the hedge fund Pershing Square Capital Management and has been amassing a big position in Kraft, echoed concerns about shareholder dilution, though he said he supported the company’s takeover effort.