LONDON Sunday newspaper round-up: Euro, British Airways, Prudential

Date: Sunday 16 May 2010

The euro is set to slide further and could be heading for parity with the dollar, analysts say. The single currency’s weakness and mounting fears over Europe’s recovery prospects could hit growth in Britain.

The euro fell to a 19-month low against the dollar of $1.23 on Friday night, amid fears that the austerity measures countries need to adopt to satisfy the EU authorities and the International Monetary Fund could tip them back into recession. Sterling ended the week up against the euro at €1.18, but down against the dollar at $1.45, the Sunday Times reports.

Europe's top central banker has rubbished suggestions that the single currency is under attack by speculators, despite the euro plummeting to a 19-month low against the dollar. In what will come as a boost to the much-criticised hedge fund industry, Jean-Claude Trichet, the president of the European Central Bank (ECB), said the poor state of Europe's public sector was to blame for the Continent's troubles, the Sunday Telegraph reports.

George Osborne is to admit defeat on new European Union rules to regulate Britain’s multi-billion pound hedge fund and private equity industry and allow finance ministers to pass a new directive which could badly damage the sector. Sources close to the new Chancellor of the Exchequer said that although the British Government still disagreed with large parts of the directive, the process was now too far down the track to be stopped. “We know we have to pick our battles and this was one we had already lost,” one source said, the Sunday Telegraph reports.

Santander is poised to win its shootout with rival National Australia Bank-Clydesdale to buy over 318 Royal Bank of Scotland branches. It's believed that the Spanish bank will be successful in its attempt to buy the Williams & Glyn-branded offices across England and Wales. The group has fought off competition from a host of big bidders including Spanish rival BBVA and Blackstone, which had teamed up with the Wellcome Trust to make an offer, the Sunday Independent reports.

British Airways will this week announce a £600m loss, the largest deficit posted by the airline since it was privatised in 1987.The size of the shortfall — analysts expect pre-tax losses of between £550m and £620m — underlines the challenges facing BA as it battles cabin crew strikes, volcanic ash, a mounting pension deficit and a tax threat from the Lib-Con coalition. Willie Walsh, BA’s chief executive, will host top shareholders at Waterside, the airline’s Heathrow headquarters, for a day-long event on Friday, the Sunday Times reports.

The Pensions Regulator is being asked to force heavily indebted music group EMI to stump up as much as £250m to plug a gap in its pension scheme. Guy Hands, whose private equity group Terra Firma acquired EMI in 2007, is facing demands from the fund's board of trustees to make good the alleged shortfall. EMI claims the deficit stands at just £10m, the Observer reports.

Andy Hornby, who was forced out of HBOS when it ran out of cash in September 2008, is expected to reveal trading profits of more than £1bn at Alliance Boots tomorrow and a £500m reduction in Boots's debts to some £8.5bn. A day later he will make a speech in London entitled "Retailing … what's changed with the credit crunch?", outlining which retailers are likely to be successful in the coming years, the Observer reports.

City investment banks are working on plans to guarantee billions of pounds in bonuses over the next few weeks to beat an expected crackdown by the new government. A clampdown on City pay is expected to form part of the emergency budget due to be delivered by June 24, following warnings from Vince Cable, the business minister. The City is lining up to defend itself from any further attack on pay, which bankers argue will kill London’s ability to compete as a global financial centre, the Sunday Times reports.

Prudential will this week raise its growth forecasts and hint at a slew of future disposals as it battles to persuade investors to back its planned $35.5bn (£24.4bn) takeover of its Asian rival AIA. Britain’s biggest insurer will publish a 1,000-page prospectus in the next few days to back up the £14bn share issue this is required to fund the deal, the Sunday Times reports.

Easyjet has drawn up plans to drop the Easy name if it cannot resolve a bitter row with the airline’s founder, Sir Stelios Haji-Ioannou. “You would expect us to have looked at this and we have. We do not want to lose the Easy name but if you are facing a flood you put up flood barriers,” a board member said yesterday. A simmering dispute between Stelios and the company exploded on Friday, with Stelios resigning from the board. He said he had stepped down to speak freely about his concerns with the way the company was being run, the Sunday Times reports.