The Irish Independent reports that Environment Minister John Gormley was handed a humiliating defeat last night in a long-running battle to stop construction of an incinerator in his constituency.

In a dramatic move, Dublin City Council said it was tired of his delaying tactics and issued a compulsory purchase order (CPO) to buy 2.5 acres of land to build the Poolbeg plant, completely removing him from the picture. Mr Gormley was required to approve a foreshore licence to allow construction of a water cooling system needed for the €200m treatment facility. But by seeking to buy the land, the council will not need the licence. It means there is no legal impediment to construction and works could begin before the end of the year.

The move came after the council's joint venture partner, US company Covanta Energy, asked the local authority to "get the ball rolling".

"It's an indication of the frustration," a source said. "There's a strong view about how the matter (of the licence) has been handled."

The company suggested it could sue for breach of contract if the plant did not go ahead. Around 600 construction jobs are promised and 60 full-time posts when it is completed.

It also follows the intervention of US ambassador Dan Rooney, who became involved in moves to stop Mr Gormley blocking the scheme.

It will come as a blow to the minister, who has repeatedly opposed construction, saying it is too big for the city's needs.

Sources close to Mr Gormley said the move was not unexpected, as the council had indicated it might circumvent the foreshore licence process.

But the council was slammed by opponents of the plant last night, with Fine Gael TD Lucinda Creighton accusing it of trying to "force the minister's hand".

And the group representing private waste operators, the Irish Waste Management Association, accused the local authority of arrogance.

"Dublin City Council is behaving in an exceptionally arrogant manner," spokesman Brendan Keane said. "It continues to plough ahead with the construction of a grossly oversized incinerator which will be bad for taxpayers and bad for employment."

The council, headed up by city manager John Tierney, has been determined to pursue its incinerator plan. In February, Mr Tierney wondered "why the project is being subjected to so many obstacles and why attempts are being made to penalise the Dublin local authorities for implementing government policy".

The council first lodged an application for a foreshore licence two years ago and until it was issued the project could not proceed.

The paperwork has been sitting on the minister's desk for months, but no decision has emerged. But in a clear snub to the minister, Dublin City Council said it took the move because of "considerable delays" that were "hindering progress".

"Due to delays in obtaining a foreshore licence, Dublin City Council has published its intention to acquire the required lands on the foreshore at Poolbeg Peninsula by CPO," assistant city manager Seamus Lyons said.

"We have taken the decision on foot of a request by our project partners, Covanta, due to considerable delays. This delay is hindering progress on construction of the plant. By acquiring the relevant section of foreshore through a CPO, Covanta will be able to progress construction of the Dublin Waste to Energy plant."

The development means there is no legal barrier to construction of the 600,000-tonne capacity plant going ahead.

It has planning permission from An Bord Pleanala, a waste licence from the Environmental Protection Agency, permission from the Commission for Energy Regulation to generate energy and was approved by the Department of the Environment.

A spokesman for the department said Mr Gormley could not comment on the move as he was precluded from doing so under the planning acts. But he said the taxpayer could be "massively exposed" to penalty payments if it goes ahead.

"This begets the lie that the minister was delaying this. They could have gone down this route previously. It's not unexpected because the council signalled it would go down this road."

The Irish Independent also reports that central bank governor Prof. Patrick Honohan has weighed into the bank guarantee debate, saying any extension of the support should be done in "quarters rather than years".

Prof Honohan's comments come a fortnight after both AIB and Anglo Irish Bank called for the guarantees to be extended until the end of next year to create certainty in the financial market.

But, speaking in Hong Kong yesterday, Prof Honohan hinted his preference for a speedier withdrawal of the supports, which are due to expire between September and December.

"I'm not in a rush to remove the guarantees but I don't want it to be [extended] in a period longer than quarters, rather than years, because if they've done their jobs properly that won't be necessary," he said.

Bank of Ireland last week told the markets that it was preparing to "disengage" from the guarantee scheme over the coming months, in a marked departure from the other banks' tones.

Market sources stress that BoI has already completed a €2.9bn recapitalisation and so faces less financial market risk than the other Irish banks, chiefly AIB and Anglo.

Prof Honohan's Hong Kong appearance is part of a whistle-stop tour of Asia's financial capitals as the Central Bank governor attempts to explain Ireland's economic recovery strategy to international audiences. Speaking in Hong Kong, Prof Honohan addressed growing fears about Ireland's financial position, insisting the €24bn cost of bailing out Anglo was "manageable".

"It's a terrible shock to the system," he said, "it's costly but it's manageable."

Prof Honohan also stressed that plans to recapitalise Anglo were well on track and had little impact on the Government's overall deficit plans, although this year's deficit would surge.

"It's very high deficit measures this year because we're taking the hit; we're acknowledging the losses in the banking system and those losses which are being paid for by the Government have to be included in the deficit," he said. The Hong Kong visit marks the third leg of Prof Honohan's whistlestop tour of Asia's major financial centres, including Singapore, Kuala Lumpur, Beijing and Tokyo.

The Central Bank governor is using the trip to explain Ireland's recovery measures to official monetary institutions and other observers, and will hold private talks with a number of monetary authorities.

Prof Honohan is also hosting two major press conferences, one on Thursday titled 'Ireland and Europe in the Context of the World Economy' and on Friday titled 'Banks & Budgets -- Lessons from Europe'.

The trip comes as international fears over Ireland's financial health continue to drive up the cost of government borrowing.

The Irish Times reports that the market for Irish government bonds stabilised yesterday on the eve of today’s scheduled auction of €1-€1.5 billion of fresh public debt. However, yields remain elevated.

The National Treasury Management Agency (NTMA) will almost certainly be obliged to offer a relatively high rate of interest this morning to entice uptake of the bonds at the auction. This is what happened last Thursday when the agency sold €1 billion of short-term debt, but paid an unusually high price to do so. These developments will push up the cost of servicing the national debt.

The yield on Irish 10-year bonds widened very slightly, to 5.3 per cent, yesterday after much larger increases last week.

The cost of insuring Irish Government debt also increased, surpassing that of Portugal, amid concerns over Ireland’s “biggest-in-Europe” budget deficit and the very high costs of bailing out the banking sector.

Last week, nervousness in the international market for government debt resulted in investors selling off the bonds of weaker euro-zone countries and buying those of the more fiscally solid countries. After Greek government IOUs, Irish bonds were most adversely affected.

The revelation that the cost of preventing the collapse of Anglo Irish Bank would be higher than previously envisaged was widely attributed as the cause of Ireland’s worse-than-average performance.

However, analysts suggest that poor sentiment may now be over-done, with spreads set to tighten once today’s auction is completed.

Yesterday, the yield on German 10-year bunds, Europe’s benchmark security, fell by as much as seven basis points to 2.3 per cent, ahead of its €6 billion bond auction later this week, pushing the differential between bunds and Irish government bonds to 299 basis points at the close of trade.

Moreover, the spread on Ireland’s five-year sovereign credit default swaps (CDS), which insure against default, advanced to 300 basis points, putting Ireland as the second-highest in the euro zone behind Greece.

However, despite the market jitters, today’s auction is expected to run smoothly. With such a premium on offer, Ciaran O’Hagan, a fixed income strategist with Société Générale in Paris, said the auction would “attract buyers out of the woodwork”.

Mr O’Hagan expects a “technical bounce” post-auction, which should see yields fall back. While he is “optimistic” on the longer-term prospects for Irish government debt, it is dependent on the Government taking action to reduce Ireland’s deficit by substantially raising taxes and charges and reducing spending in the next budget.

And, while the widening of Irish bond spreads over the past week may be due to concerns over the sovereign’s fiscal stability, there are other factors at play, such as low liquidity levels in what are summer trading conditions, and typical behaviour ahead of an auction.

“The price has to cheapen to get buyers in,” said Mr O’Hagan, “it’s normally what you’d expect ahead of an auction”.

While the NTMA has said that it retains the flexibility to postpone any of its regular monthly bond auctions, it believes that setting out its stall regularly and as planned gives it the best chance of retaining its purchaser base, thereby allowing it to continue to raise funds to finance the Government’s very large budget deficit.

Moody’s Investor Services also gave a cautiously upbeat view yesterday, suggesting that “the worst days for Ireland and its banks are (probably) past”, although it added that “fresh volatility, if sustained, would be credit-negative”.

Donal O’Mahony, chief global strategist with Davy Stockbrokers, is also positive on prospects going forward, and said that, while the renewal of the banking sector is imposing a “heavy price on Irelands fiscal position”, on a cash flow basis the impact is perhaps less than expected.

This is because borrowing costs are spread out over a longer-time period as Anglo Irish Bank’s capital injections are in the form of promissory notes, which will be borrowed and paid for over the next 10-15 years, thereby limiting the impact on sovereign debt issuance to about € 2.5 billion a year. As such, he said that the fiscal burden of the recapitalisation of the banking sector is “less than feared”.

The Irish Times also reports that ESB workers will today formally agree to a pay freeze as part of a deal aimed at tackling the State-owned energy company’s €2 billion pension shortfall.

Following a review by actuaries at the end of 2008, it emerged that the ESB’s pension scheme had a €1.957 billion deficit, which meant that, even allowing for future contributions and investment income, it fell almost €2 billion short of its total projected liabilities.

The company subsequently began talks with representatives of its group of unions in an effort to address the crisis.

Both sides recently reached an agreement on a solution which attracted 70 per cent support in a ballot of workers. Unions and management will formally sign off on the deal today.

The agreement calls for a pay freeze at the State company for three years. Similarly, the 7,000 or so former ESB workers receiving pensions from the scheme will not get any increase to their payments during that time.

Up to this point pensioners got increases in line with those paid to workers at the State company. After the three-year freeze, any hike in benefits will be tied to inflation.

The ESB will pay an extra €591 million into the scheme over a period of years on top of the regular contributions made by the company and employees.

According to Brendan Ogle, secretary of the group of unions, there is no question of an ongoing increase in contributions as between company and staff contributions about 24 per cent of its wage bill already goes towards maintaining the scheme.

The rules for calculating the final benefit will also change from January 1st, 2012. From then it will be based on career average earnings rather than final salary, which will cut the amount paid to those who retire from that point on.

Mr Ogle said the deal meant that “everyone involved has to take a certain amount of pain” including the company, pensioners and workers.

The long-term target return from the fund will be cut over 10 years from 7 per cent a year to 6.25 per cent a year to limit its exposure to higher-risk investments.

According to a document detailing the agreement, the scheme earned €260 million more than the targets set by its managers in 2009 and continued to perform well in the early months of this year.

However, the document states that this “bounce” in the level of returns on its assets resulted from a strong recovery in markets in the immediate period after the crash in late 2008. It says this cannot be relied on in the long term.

The ESB gave its workers a 3.5 per cent wage increase in late 2008. The payment was part of a previously agreed national pay deal between the Government and the social partners.

A number of State companies, including Bord Gáis, have since agreed to increase pay to their staff.

The Irish Examiner reports that Irish bank shares plunged yesterday as funding issues persist and less signs of an economic turnaround are seen.

Experts said the rising cost of government borrowing and continued uncertainty about the state guarantee for banks after September both weighed heavily in early trade.

In the morning AIB was down almost 5% while Bank of Ireland was 6% lower. At the close AIB was down 4.3% to 80 cent while Bank of Ireland finished down 2.2% to 77 cent. Irish Life and Permanent was also down 2% to €1.66.

Overall, Irish shares closed down 0.4% yesterday. Next week is a big one for many Irish firms listed on the stock market. Companies such as CRH, Aer Lingus and Independent News and Media are all due to report results.

Across Europe yesterday stocks also fell, extending last week’s biggest drop in more than a month, as slower-than-forecast economic growth in Japan increased concern that the global recovery may be faltering.

National benchmark indexes declined in 12 of the 18 western European markets. France’s CAC 40 slid 0.4%, while Germany’s DAX and Britain’s FTSE 100 were little changed.

A report yesterday showed Japan’s economy grew at the slowest pace in three quarters, pushing it into third place behind the US and China. Separate US data showed manufacturing in the New York region expanded less than forecast in August as orders and sales declined for the first time in more than a year.

Ireland may face rising borrowing costs at an auction of 4 and 10-year bonds today.

However the bond auction is expected to go "smoothly," analyst Ciaran O’Hagan at Societe Generale in Paris said. "The amount issued is low and the market is prepared for the auction, with the bonds cheapening considerably ahead of it."

Also yesterday Nomura International said Irish banks have about €30 billion of government-guaranteed debt securities to roll over in September.

The premium investors demand to hold Irish 10-year debt over the German benchmark has risen 63 basis points over the past week, partly on the "worrisome bank guarantee roll, also known as the funding cliff," London-based analysts including Guy Mandy and Nick Firoozye said.

US banks ease lending standards - - US banks eased lending standards to consumers and businesses in the second quarter even as demand for credit remained flat, the Federal Reserve said.

US house mortgage arrears mount - - Mortgage delinquencies have risen in nearly all US congressional districts from the levels of the last election, highlighting the political pressure on US policymakers as they gather in Washington today to tackle the housing crisis.

Sarkozy rebuked over raids on Roma camps  - - Members of the French president’s own right-of-centre party criticise him for his policy of breaking up of gypsy encampments and the launching of a government offensive against crimes committed by people of foreign origin.

Merkel to stick with cuts despite growth - - The German chancellor is sticking with plans to cut public spending and hold off tax cuts even amid evidence the economy this year could expand at twice the rate last forecastWith many economists now expecting growth to hit 3 per cent in 2010 – more than double the 1.4 per cent forecast by the government in April – the government is considering what to do with the extra tax intake that will result.

Tough targets for UK benefit reforms  -- Treasury sets Duncan Smith tight financial conditions; The fiscal parameters tentatively agreed with the Treasury – requiring net savings of at least £10bn over the next four years – mark an uneasy truce in a cabinet row that gives Mr Duncan Smith some room to manoeuvre but leaves a tense final negotiation ahead.

Blair pledges book proceeds to armed forces charity - - Ex-PM donates to Royal British Legion.

Coalition urged to give support to industry - - Pat McFadden, shadow business secretary and a former policy adviser to Tony Blair, the ex-prime minister, told the Financial Times that a reluctance to give the industrial sector government support was one of the Labour government’s biggest mistakes.

Pentagon hits at Beijing’s military secrecy - - China’s reluctance to come clean about the scope of its military activities increases the risk of misunderstandings in a highly charged part of the world, the Pentagon has argued.

Japan makes an effort to see the positive - - Shirakawa also noted that Japan has to rely on high-quality manufacturing because policymakers “don’t have any strong view on how to stimulate domestic demand”.

US to Tighten Reviews for New Offshore Drilling Plans - - The Obama administration said it would require more review before approving new offshore drilling permits, ending a practice in which regulators essentially rubber-stamped projects.

Despite H.P.’s Efforts, Spectacle of a Chief Goes On - - Hewlett-Packard had hoped that Mark Hurd’s resignation would close this chapter, but a stream of leaks followed; The directors had often talked with him about taking the world’s biggest technology company back to its roots as an innovator after the big-ticket acquisitions of 3Com and Palm. They doubted that Mr. Hurd, ever meticulous and boastful of his integrity, could commit such unscrupulous acts, according to people with knowledge of the board’s thinking.

G.O.P. Seizes on Mosque Issue Ahead of Elections  -- Congressional candidates intensified efforts to inject the divide over an Islamic center near ground zero into midterm campaigns; “Ground zero is hallowed ground to Americans,” Elliott Maynard, a Republican trying to unseat Representative Nick J. Rahall II, a Democrat, in West Virginia’s Third District, said in a typical statement. “Do you think the Muslims would allow a Jewish temple or Christian church to be built in Mecca?”

The Constitution and the Mosque - - The NYT says in an editorial that President Obama needs to push back even harder against the voices of intolerance regarding the building of a mosque in Lower Manhattan; Mr. Obama and all people of conscience need to push back hard. Defending all Americans’ right to worship — and their right to build places to worship — is fundamental to who we are.

Judge Orders Man’s Release in a Three-Strikes Case  -- A man was serving a near life sentence under California’s three-strikes law for trying to break into a soup kitchen; In 1997, Mr. Taylor was homeless and sleeping at a church in downtown Los Angeles. One night, he tried to pry open the doors of the soup kitchen there because he was hungry, he told the police at the time.

Denmark Starts to Trim Its Admired Safety Net - - In June the government cut into its benefits system, the world’s most generous, by limiting unemployment payments to two years instead of four; Each year, a remarkable 30 per cent of Danes change jobs, knowing the system will allow them to pay rent and buy food so they can focus on landing a new position. About 80 percent belong to unions, which manage the workplace, help run the unemployment insurance program and press the laid-off into retraining.

A Flight Attendant’s Lot Is Not a Happy One - - The incident involving the JetBlue flight attendant highlights the rising tensions on airplanes, including those involving stowing carry-on bags in bin space; Right after a JetBlue flight attendant, Steven Slater, plunged down an emergency chute last week with beers in hand, Rene Foss started thinking about working the escapade into a song for the next edition of her musical revue, “Around the World in a Bad Mood.”

Analysts: Lilly Faces Growing Financial Pressure (blog) - - The Indianapolis drug maker is facing the worst patent losses in the industry and growing questions about how it will respond; In the past five years, Eli Lilly, which has a plant in Dunderrow, Kinsale, Ireland, has introduced only one new product, and while it has promising research under way, nothing new is imminent. And some recent decisions involving its high-profile drugs, like one for treating attention deficit disorder, represented setbacks.