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For example, about pounds 1.75bn of the March increase in borrowing was financing for Granada's takeover of Forte.However, Professor Tim Congdon of Lombard Street research, a member of the Treasury's panel of "wise persons", said: "There are classic signals of monetary excesses."Institutional investors flush with cash were bidding up shares, land and property prices, he said. It has been running above the Government's 3-9 per cent target range for the past five months.Eddie George, Governor of the Bank of England, warned the Chancellor of the Exchequer last month that rates might have to be raised again if monetary growth did not moderate. There was also record demand for pounds 1.4bn of funds by leasing companies.Martin Hall, director general of the Finance and Leasing Association, said this was consistent with members' reports of a strong pick-up in investment demand, particularly for inward investment and infrastructure projects.Growth of the broad money measure, M4, remained in double digits at 10.1 per cent compared with 10.2 per cent in February. The spectre of higher interest rates was raised yesterday by new figures showing far stronger than expected lending and monetary growth last month. Michael Dicks, an economist at investment bank Lehman Brothers, said: "This is another plank in the argument for interest rates to go up sooner rather than later." Financial markets expect the cost of borrowing to start rising by the autumn, a timetable that could be embarrassing for the Government. Total lending by banks and building societies amounted to pounds 5.9bn last month, with the big banks reporting a further rise in loans to industry though mortgage lending remained flat.The British Bankers' Association said borrowing by manufacturing industry at pounds 365m was the highest for a year. It is offering pounds 9.60 cash a share and is allowing Southern Electric shareholders to retain a second interim dividend of 26.3p in effect raising the value of the offer to pounds 9 86.3p. The initial bid last October was worth pounds 10.10 a share but since then Southern Electric has sold its stakes in the National Grid and the pumped storage power station business First Hydro and undertaken a share consolidation.On a like-for-like basis, the bid is worth about pounds 11 compared with last October's offer.

Shares in National Power rose 13p to 605p while Southern Electric shot up 32p to 891p.The American camp immediately attacked the revised offer, arguing that it valued Southern on a higher earnings multiple than any of the other regional electricity companies taken over so far.Analysts estimated that the bid valued Southern Electric at 14 times earnings compared with the 11 times earnings that Southern Compny paid for Sweb last year and the 13.6 times that another US utility, Central and South West of Texas, paid for Seeboard - the highest bid in the sector so far.However, National Power hit back arguing that the power station disposal to Hanson and the Southern Electric bid, if successful, would lead to "very significant earnings accretion", giving it scope to raise dividends.Analysts estimate that the two deals could enhance earnings by between 20 and 30 per cent.National Power added that neither it nor Southern Electric, believed the approach by the US company changed the "compelling logic supporting an immediate implementation of their proposed strategic unification".Comment, page 19. Other sources have suggested that Southern Company may pull out and look elsewhere following National Power's pounds 1.7bn sale of three power stations to Hanson first week and yesterday's raised offer for Southern.National Power's increased offer for Southern Electric is conditional on the merger being approved on terms and conditions which are satisfactory. The increased offer came as a Government announcement on whether to allow through this merger and PowerGen's bid for Midlands Electricity was believed to be imminent. Ian Lang, Secretary of State for Trade and Industry, is expected to announce his decision this week, possibly in the next 48 hours, signalling what could be a rash of vertical integration across the electricity industry.Southern Company refused to add to its statement last week that it was considering a "combination" with National Power but would await the Government's ruling on the two generators' bids before announcing terms.However, a spokesman in Atlanta, Georgia, said that the statement "still stands". The pounds 925m overall loss was reached after interest charges of pounds 768m, of which pounds 118m is a charge for bank interest unpaid since the standstill on 14 September.Comment, page 19. National Power yesterday raised the stakes in its battle to fend off a hostile bid from Southern Company of the US by raising its offer for the regional UK power company Southern Electric by about 10 per cent to pounds 2.5bn. He said: "Shareholders have to vote on any solution other than a shutdown and the process of moving towards that vote is overseen on an informal basis by the mandataires ad hoc."These are two court appointees, Lord Wakeham, chairman of the Press Complaints Commission, and Robert Badinter, former French Minister of Justice.To rub home the point against the banks that this is not an ordinary corporate rescue, Sir Alastair said: "An Anglo-Saxon shutdown and sell- off just does not do them any good in this case."He believed that when an outline deal was reached with the 26 lead banks - which is unlikely before the autumn - "there is going to be something for the banks and something for the shareholders or there is not going to be a deal - and everybody wants a deal."Although the shares slipped 4p to 69p yesterday, Sir Alastair insisted that the pounds 925m loss was no surprise, and was foreseeable from the numbers the company had given at the interim results in the autumn.Last year, after bank fees of pounds 60m and depreciation of pounds 136m Eurotunnel lost pounds 200m before interest. Refusing to discuss the negotiations with the banks in any detail before the annual meeting in June, he said: "One thing we won't do is swap debt into equity and go away." However, he conceded that a debt-for-equity swap could form a part of a more complex package.Sir Alastair repeated his claims that the Anglo-French nature of the company - two-thirds of whose shares are owned in France - gave special protection under French law to shareholders.

These included pounds 45m in the fourth quarter of last year as a result of the suspension of payment of interest on pounds 8.1bn of the pounds 9bn debts.Sir Alastair insisted that there would still be equity left for shareholders once the debt restructuring with the banks was completed.A shutdown or receivership did neither the banks nor Eurotunnel any good. "Nobody should plan to get project financing rates for the next 57 years" he added.Eurotunnel, which yesterday replaced SBC Warburg with Kleinwort Benson as its UK broker, also pays substantial fees to its 225 banks. He called this one of the main sticking points with the banks. Sir Alastair Morton, co-chairman of Eurotunnel, has told banks they must slash the interest rates and fees they charge on the tunnel's pounds 9bn of loans. Announcing losses last year of pounds 925m, Sir Alastair said yesterday that Eurotunnel had warned the banks that the company may never be able to repay its debts during the entire 57 years left for its concession. The company said it had told the banks and the two mediators appointed by the French courts that negotiations "should not be based on any assumptions that cash flows over the life of the concession will necessarily be sufficient to repay the banks their principal plus interest, at the levels currently in the credit agreements, plus interest and penalties payable thereon."Sir Alastair made clear that the comment was aimed principally at persuading the banks to cut their profit margins.Eurotunnel currently pays its banks a margin of more than 1.6 percentage points above the standard London interbank interest rates on its debts.Sir Alastair said this margin was appropriate for a project in its construction phase but not for one that is complete and has 57 revenue-earning years ahead. The Bell Atlantic deal "is the one that everyone thought made sense," said Scott Cleland of the Washington Research Group.Navigating the regulatory hurdles may not be simple, however. Federal and state regulators will consider the claims of consumer groups that combined, the two Bells will have too much power to set rates in the North- east region.

"If there were any two Bell companies that were in a position to go in and compete with one another, because they have known brands across regions, it would be Bell Atlantic and Nynex," Bradley Stillman of the Consumer Federation of America contended."Instead, we have two entrenched monopolies joining forces to create one monopoly.". With this deal and the $16.7bn fusion announced two months ago between Telesis Pacific of California and SBC Communications, the number is set to decline to five.Analysts had widely anticipated yesterday's announcement and by-and-large declared it desirable and even inevitable. "This a merger of equals in every sense of the word."Under the deal, Mr Smith, 58, will run the new Bell Atlantic for the first year, after which control will begin to transfer to Ivan Seidenberg, 49, the chairman of Nynex.The Baby Bells were created in 1984 when the US government forced the break-up of the old AT&T - or Ma Bell Until this month, there were seven Bells across the US. Together, they cover an area densely populated by business and private customers, from Maine to Virginia and taking in cities such as New York, Washington DC and Philadelphia."This is the most natural partnership in the world," Roland Smith, the chairman of Bell Atlantic, declared at a news conference. It would have a global workforce of 133,000 employees and boast combined revenues, based on 1995 figures, of $27.8bn. The way for the merger was opened by the passage through the US Congress two months ago of a sweeping telecommunications deregulation bill that lifts many of the barriers to competition between long-distance and local telephone providers and cable companies.By combining, the companies hope to contend with new competition in their local markets and to break into the lucrative long-distance sector, both in the US and internationally.

The new company, to be called Bell Atlantic and based in New York, would be the second-largest telecommunications company in the US behind AT&T and the fourth-biggest world-wide. The deal, which still faces the scrutiny of shareholders and of federal and state-level regulators, would be worth almost $23bn (pounds 15bn), making it the second-biggest merger of any kind in US corporate history, after the 1989 takeover of RJR Nabisco by Kohlberg Kravis Roberts for $26.4bn. Two telephone Baby Bells, Bell Atlantic and Nynex, yesterday announced plans to combine forces in the biggest telecommunications merger ever seen in America. He had changed his appearance and forged papers in an apparent plan to resettle in Australia. Masterman was convicted last year in the US of raping an eight-year- old girl and of twocharges of indecent assault and corrupting minors after he raped a friend of his daughter's and fondled two other girls who were staying with his children from 1990 to 1992.The Philadelphia assistant district attorney Liz Jobes said Masterman has a knack for electronics and rigged his monitor so it still sent the normal signals even though he had fled.With his sentence of 11 to 22 years for the rape and molestation, coupled with a possible four years for escape, Masterman now faces about 15 to 30 years in prison.. A British man convicted of child molestation in the United States fled to the UK after tampering with his electronic monitoring tag Last night he was back behind bars. A Scotland Yard extradition squad apprehended Raymond Masterman, 50, last Friday at a relative's house in Essex. "The situation is very serious," said General Damdinsuren, deputy chief of the Mongolian State Emergency Commission, adding that the fire damage was "huge". Smoke from about 80 fires across a sprawling country the the size of western Europe was hampering efforts to extinguish the blazes that had killed at least one woman."We cannot even see where and how large the fires are from the airplanes because every place is thick with smoke," said Mr Damdinsuren.Since the fires roared onto the Mongolian Steppe on 9 April, some 3,000 firefighters, helped by nomads, have been working around the clock to bring the flames under control.Shortages of food, exhaustion and poor equipment hampered firefighting efforts, Mr Damdinsuren said, adding that nomads in the remote Hentii mountains had fought the fire for days with just coats and tree branches..