The Irish Independent reports that a shock doubling in the cost of some government borrowing yesterday has been blamed on uncertainty about the final cost of bailing out Anglo Irish Bank.

But the government agency in charge of the national debt is determined to go ahead with a more significant fundraising next Tuesday -- despite yesterday's worrying rise. The monthly borrowing of up to €1.5bn will now be watched closely next week to see if there has been a real fall in Ireland's credit rating. The shock came when lenders demanded an average rate of almost 2.5pc on short-term loans due for repayment in February. This compared with a rate of just under 1.4pc for similar loans only three weeks ago.

The European Central Bank bought Irish government loans yesterday, according to reports on the financial news service Bloomberg, in what will be seen as a move aimed at easing market strains.

Yesterday's expensive fund-raising came a day after news that yet more money might have to go into Anglo Irish Bank than had previously been estimated.

The governor of the Central Bank, Patrick Honohan, has described the rates now being demanded for government borrowing as "ridiculous" and said they "are a setback for our hopes of a narrowing to reflect the fiscal credibility of the country".

A Central Bank source said yesterday that Dr Honohan stood by his words, despite yesterday's sharp rise in debt yields.

Borrowing costs for Ireland and Portugal have been rising steadily, after a short-lived fall when EU stress tests of banks were published last month.

The more important 10-year loans are costing more than 5pc -- an annual rate which is about as fast as the economy can possibly be expected to grow.

Lenders are worried about budget deficits in both countries and about budgets and banking costs in Ireland.

They fear EU statisticians will insist that the 10-year bill for rescuing Anglo is all recorded on this year's government accounts -- producing a deficit of more than 20pc of output (GDP).

Growing political opposition to more spending cuts will also raise questions in the minds of international banks that lend to the Government.

"There is a danger that markets get spooked and demand rates well in excess of 5pc at next week's fundraising," said Brian Lucey, associate professor of finance at Trinity College Business School.

He added: "Anything much over 5pc is dangerous territory."

Markets are also worried about €80bn in loans which Irish banks are due to repay and replace with fresh borrowings in the next few months

The new debt will be guaranteed by the State, but no one can see when the State might be free of these liabilities.

"One wouldn't read too much into what happens in quiet August days," said Rossa White, economist at Davy Research.

He added: "But there will be no major progress until we get EU decisions on the Anglo restructuring plan and move beyond that."

Nick Stamenkovic, a strategist at RIA Capital Markets in Edinburgh, said: "Irish debt is currently in the firing line because of concern over the fate of the country's banks and its implication on government finances.

"Investors are going to demand higher risk premiums."

The National Treasury Management Agency believes that cancelling next Tuesday's monthly fundraising would be seen as a panic measure.

It will therefore auction four-year loans and 10-year loans at the best interest rate it can get.

The Irish Independent also reports that while other financial institutions are shedding staff, the Central Bank is hiring as it beefs up to improve regulation of the financial services sector.

The bank attracted 1,500 applications from graduates eager to work in the Dame Street firm during a recent recruitment drive, although only 60 -- or one in 25 -- will get jobs.

Last night, some of those gathered in the National Convention Centre to listen to Financial Regulator Matthew Elderfield discussing graduate opportunities.

The bank will begin a new round of graduate recruitment for 2011 in the autumn.

The National Asset Management Agency and the Central Bank are among the few financial organisations still hiring large numbers of graduates as they attempt to clear up the mess created by reckless lending over the past decade.

The regulator is looking for staff for its two supervisory departments, one for retail banking and the other for wholesale. Other departments will attempt to assess risk and promote financial stability by creating an assessment framework for the banking sector.

Supervise

Mr Elderfield has said he wants about 10 regulators to supervise each bank, or five times the pre-crisis number.

The Central Bank expects to recruit an extra 150 employees, including 60 graduates, this year, bringing overall numbers to 1,300. It aims to add a further 150 employees next year.

The regulator is also looking for specialists with direct business and banking experience, especially those with a background in credit, liquidity, treasury, markets and risk.

"Our new approach to supervision requires staff with appropriate technical and commercial skills that are able to effectively challenge and interrogate institutions," the bank said in a report earlier this year.

Mr Elderfield told a Dail committee that financial institutions would be forced to pay for the higher costs.

"The cost of regulation will rise. But judged in the context of the huge cost of a financial crisis, the increase in the cost of regulation must be seen as a price worth paying," he said.

The Irish Times reports that Government officials have been examining the option of making employees pay PRSI contributions on rental income, investments, share options and other “unearned income”.

It is under consideration as part of a new “universal social contribution” which is expected to replace PRSI, the health levy and income levy in the forthcoming budget.

Internal documents prepared for the secretary general of the Department of Social Protection show measures being studied include:

Removing the income threshold under which low-paid workers don’t have to make PRSI contributions, but are entitled to social insurance benefits. At present employees who earn less than €352 a week are exempt from making PRSI contributions.

- Ensuring employees and the self-employed pay the same rate of PRSI. At present the rate for self employed is 3 per cent, while it is 4 per cent for employees.

- Reforming employers’ PRSI contributions to reduce the cost of employing workers who earn less than €500 a week.

- Introducing a minimum earnings threshold for access to full-rate PRSI benefits.

- Removing the ceiling, above which employees pay no further PRSI contributions. This is currently set at €75,000.

- The idea of extending PRSI to “unearned income” was originally proposed by the Commission on Taxation last year.

Internal records state the Department of Social Protection would welcome such a move which would broaden the PRSI base and help tackle the deficit in funding for welfare benefits. While there may be some technical issues with implementation, officials state the feasibility of progression in the short term is being examined.

As well as making the system “fairer and more equitable”, the reforms are also aimed at addressing a shortfall in the social insurance fund, which is used to pay for PRSI and other welfare benefits. The surplus in the fund is due to run out this year. As a result, it will require exchequer funding of about €2.5 billion this year.

A group of officials from the Department of Finance, in consultation with the Department of Social Protection, the Revenue Commissioners and other departments, have been examining proposals for a new “universal social contribution”. It is due to report to Minister for Finance Brian Lenihan in the coming weeks.

The internal documents relating to this issue were released to The Irish Times under the Freedom of Information Act.

They do not include the views of the Department of Finance, which will be crucial to any final measures.

The records state the current lack of a minimum earnings threshold for access to full-rate PRSI benefits represents “bad value for money”.

For example, it states that a person working part-time and earning as little as €38 a week, or 4.5 hours or less per week at the minimum wage, is entitled to social insurance benefits. Officials suggest that this threshold could be raised to about €70 a week.

The Government had pledged in its programme for government in 2007 to reduce PRSI contributions from 4 per cent to 2 per cent over the lifetime of the administration. Any shortfall in the social insurance fund would be reimbursed by the exchequer. In the revised programme for government last year, there was no reference to reducing PRSI contributions but there was a pledge to abolish the PRSI ceiling in parallel with the reduction of the “temporary income levy”.

This, it said, would improve the inequity whereby “higher-paid employees pay proportionately less of their income for social insurance than lower-paid employees”.

The Irish Times also reports that Anglo Irish Bank and Ulster Bank are preparing to provide €10 million in additional working capital to retailer Arnotts to support the company.

Earlier this year the two banks provided €12 million in new working capital as Arnotts sought to restructure itself to meet the challenges of the recession.

Speaking to The Irish Times yesterday, in his first interview since becoming Arnotts chairman on Wednesday, Mark Schwartz said the new funding would help to make the company “self-sufficient”.

“It is more than sufficient to support the working capital needs of Arnotts for the foreseeable future,” he said.

Earlier this week, Anglo and Ulster Bank got clearance from the European Commission to take joint ownership of Arnotts as part of a major debt restructuring deal.

The banks are owed more than €300 million, with State-owned Anglo on the hook for 55 per cent of that total.

Mr Schwartz said the banks were fully committed to Arnotts and there was “no timetable” for them to exit the business. “As we generate excess cash flow, we will use that to pay interest and pay down loans,” he said. “One has to take a long-term perspective.”

When asked about Arnotts’ likely future ownership, Mr Schwartz ran through some options. On the possibility of it becoming a public company again, he said: “That could be a possibility.”

On the possibility of looking for new investors, he said “perhaps”.

What about a trade sale, possibly to a large department store operator such as John Lewis in the UK? “We haven’t even discussed that yet.” He declined to be drawn on whether any unsolicited approaches have been received.

Mr Schwartz said there was considerable value in the Arnotts brand. “People don’t come here because

of the location or because we have other brands in the shop. They are coming here because Arnotts stands for something.

“There’s a lot of value in the name itself and in the heritage of the brands. That’s something we recognise.” Mr Schwartz added that he had visited Arnotts several times on visits to Ireland over the past 20 years. The American executive, who also heads private equity firm Palladin Capital Group, said sales had increased this year by “high single digits” and the company would be “ebitda [earnings before interest, tax, depreciation and amortisation] positive” this year.

“We need to focus on rebuilding the [retail] business.”.

He said “some additional directors” would be appointed over time.

The Irish Examiner reports that the global food giant, Kerry Group, confirmed yesterday it had made a €33 million offer for Newmarket Co-op Creameries.

Kerry said it had offered to acquire the entire issued share capital of the Co Cork co-op for €421 per share.

The deal, if approved, will be worth an average €39,000 to each of the co-op’s 680 shareholders, most of them residing in the Duhallow region of north-west Cork.

A person with 40 shares would receive €16,840 before tax, or a person with 100 shares €42,100.

Approval by Newmarket shareholders and the Competition Authority will be required.

An information meeting for shareholders will be held in Ballydesmond on August 25, followed by a special general meeting in Meelin on September 2.

The offer is being presented to shareholders by Newmarket board without a recommendation.

All the information will be placed before the Ballydesmond meeting with Kerry Group representatives also attending to answer questions

Independent financial and accountancy company, Pricewaterhouse Coopers, has advised the Newmarket board the Kerry offer represents fair value.

The offer would require a rule change to be voted on by Newmarket shareholders if it is to proceed. Members will be asked at the special general meeting to vote for or against a rule change. If a rule change is approved, members will then decide on whether to accept the offer.

Newmarket is a leading manufacturer of cheese from a state-of-the-art production facility and is a major supplier to Kerry’s branded cheese business.

Newmarket has some 150 active milk suppliers and employs 110 people.

Newmarket co-op chairman Patrick McAuliffe and chief executive Michael Cronin urged all members to participate in "this fundamental decision" on the co-op’s future.

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