Euro QE Stimulus Plans Clear Legal Hurdle

The publication of a legal opinion by the European Court of Justice has seemingly removed a hurdle from efforts to stimulate the struggling eurozone economies.

An advisor to the court found that a hugely controversial bond-buying programme blueprint, readied by the European Central Bank (ECB), was legal.

The Advocate General's opinion, which is usually rubber-stamped later by judges, was released just days before the ECB is tipped to launch its first such operation in the form of quantitative easing (QE).

The stimulus model is expected to be similar to the one designed for use at the height of the eurozone crisis.

That programme was found to be "in principle" in accordance with European treaties.

The legal challenge was launched by German politicians and academics who claimed the ECB would be over-stepping its powers, as it is forbidden to fund governments.

However, the opinion did raise the prospect of the ECB having to withdraw from euro nation bailouts, as it suggested that the central bank would have to remove itself from any direct aid programme to a member state if QE was to benefit that nation.

The ECB is currently a member of the so-called 'troika' of inspectors that supervises Greece and Cyprus with an emergency aid programme.

The timing, scale and operation of the ECB's looming QE programme has remained unclear though ECB president Mario Draghi is under pressure to make good a promise to do "whatever it takes' to save the euro."

He raised the stakes on Wednesday, telling the German weekly newspaper Die Zeit that the bank had few other options at its disposal to counter the risk of deflation.

He said: "All members of the ECB's governing council are determined to fulfil our mandate."

The remarks were seen as rubber-stamping speculation that QE will be announced in eight days time.

Germany has consistently opposed any form of QE.

Europe's largest economy fears footing a hefty bill as it would flood euro area governments with cheap finance, allowing them to avoid economic reform.

One other thorn in Mr Draghi's plans is uncertainty over Greece, which could exit the single currency following the country's snap election on 25 January.

Polls suggest the poll could sweep an anti-austerity party to power, thus placing the country's rescue package in jeopardy.

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Global Economy 'Running On One Engine'

There have been sharp share falls in London after the World Bank cut its growth forecast for 2015 and next year, declaring the world's economy was "running on a single engine."

Its twice-yearly Global Economic Prospects report said that weakness in the eurozone, Japan and in some major emerging economies offset the benefit of lower oil prices.

The global development lender predicted the global economy would grow 3% this year - falling from its previous forecast of 3.4% in June last year.

GDP growth would achieve 3.3% in 2016, it predicted.

The report's findings contributed to a sell-off of mining and energy stocks on the commodity-heavy FTSE 100 share index during trading on Wednesday - leaving it 2.4% down at 6388 at the close.

Video: Downgrades Reflect Euro Weakness

Falling copper prices and data showing weaker-than-expected US retail sales in December also helped extend the losses.

World Bank chief economist Kaushik Basu said: "The global economy is at a disconcerting juncture.

"The global economy is running on a single engine, ... the American one. "This does not make for a rosy outlook for the world."

The body said strong growth prospects in the United States and Britain separated them from other rich nations.

It warned on the potential impact of deflation in the countries using the euro and in Japan and said that among emerging market economies Brazil and Russia in particular weighed on its predictions.

Russia, which is heavily dependent on oil revenues, is suffering amid a 60% plunge in world oil prices - coupled with sanctions imposed by the West over its actions in Ukraine.

The resulting weakness of the rouble has stoked inflation leaving the country facing the prospect of recession.

Growth has slowed in China but it is more a managed slowdown as it transitions away from an investment-led growth model.

The report said that while lower oil prices should be a net positive for the world economy, it would increase short-term market volatility and reduce investments in unconventional oil such as shale and deep sea oil.

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Firms 'Named And Shamed' On Minimum Wage

The Government has "named and shamed" 37 employers, including high street fashion brand H&M and Welcome Break, accusing them of failing to pay the national minimum wage.

It claimed the companies collectively owed £177,000 to their workers in arrears and they faced financial penalties of more than £51,000.

The Department for Business said each company was thoroughly investigated by HM Revenue and Customs after workers made complaints to the free and confidential Pay and Work Rights Helpline.

Business Minister Jo Swinson said: "Paying less than the minimum wage is illegal, immoral and completely unacceptable.

"If employers break this law they need to know that we will take tough action by naming, shaming and fining them as well as helping workers recover the hundreds of thousands of pounds in pay owed to them.

"We are also looking at what more we can do to make sure workers are paid fairly in the first place. As well as being publicly named and shamed, employers that fail to pay their workers the national minimum wage face penalties of up to £20,000.

"We are legislating through the Small Business, Enterprise and Employment Bill so that this penalty can be applied to each underpaid worker rather than per employer."

Almost 100 employers have now been publicly named by the Government since a new regime came into force in October 2013.

Unions have been pressing for larger fines against firms found to be paying less than the statutory rate of £6.50 an hour for adults, £5.13 for 18 to 20-year-olds, £3.79 for 16 and 17-year-olds and £2.73 for apprentices.

Sky News was attempting to contact firms identified by the Government for their response.

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Why Record Inflation Fall Is Not All Good News

How low is too low? That's the question economists are asking today after the Consumer Price Index (CPI) inflation rate dropped from 1% to 0.5%.

It's the lowest official inflation number for a decade-and-a-half, and the first time it has halved in the space of a month.

Moreover, with oil prices continuing to fall – now below $50 a barrel on the Brent crude international measure – the likelihood is that the CPI will only continue to fall.

At the very least it will drop to the lowest level since comparable records began in 1989. It may even drop into negative territory.

Should consumers be concerned? No. In the short term, this fall is good news – the equivalent of a tax cut for most consumers.

In fact, according to calculations by Capital Economics, the fall in petrol prices alone should put £455 back into the average household's pockets.

The fact that lower energy prices also push down a host of other costs should continue the 'tax cut' in coming months.

Moreover, with inflation at 0.5% it is now comfortably below the rate at which wages are increasing (1.6%, excluding bonuses) – so the longest squeeze on living standards since Victorian times is now at an end.

Finally, because inflation is well below the Bank of England's 2% target, it is even less likely to raise interest rates in the near future.

Market expectations for the date of a rate increase have now shifted from this summer to next spring. And the expected level in five years is now 1.4%, compared with 2% expected a couple of months ago.

That means more impetus for consumer spending in the coming months and, perhaps, an even stronger recovery later this year (though the near-term turbulence in Russia and elsewhere caused by falling oil prices might weigh on growth in the immediate future).

However, it's not all good news. There is good deflation and bad deflation. Good deflation, of the kind depicted above, is a temporary cut in prices – a temporary boost to consumers' real incomes.

No one changes their behaviour or spends less as a result – quite the contrary. Bad deflation is the kind witnessed in the US in the 1930s when prices fell for a prolonged period of time along with wages.

Because this deflation lasts longer, and is associated with weaker growth, it is trickier to shake off.

There are serious concerns this kind of deflation is taking hold in Europe – quite apart from recent oil-led falls. Indeed, in certain countries, such as Greece, this 1930s-style deflation is already quite evident.

Prices are now falling across the Eurozone, and if economists' forecasts are to be believed, they could stay low for some time.

That's why the European Central Bank looks likely to engage in full-blown quantitative easing either this month or soon afterwards.

The only question is quite how it has managed to structure the programme so it doesn't fall foul of the inflation hawks at the Bundesbank.

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Osborne: No Need To Fear Low Inflation Rate

Britain should celebrate the low inflation rate and not be frightened by it, Chancellor George Osborne is to insist.

He will say the slump in the headline rate to just 0.5% is due to external factors - and the benefits for consumers should be welcomed.

The comments, in a speech to the Royal Economic Society on Wednesday, come as Mr Osborne and Bank of England governor Mark Carney seek to calm nerves over the issue.

Bank of England chief Mark Carney

The Consumer Prices Index (CPI) hit its joint lowest level in December, thanks mainly to cheaper food and petrol.

Economists said the continued plunge in the oil price meant it was likely to fall further and a brief period of negative inflation was "not entirely out of the question".

Video: Consumers Welcome Price Drops

Mr Carney - who is due before the Treasury Select Committee later - has conceded deflation is now "possible", but insists Britain has the tools to deal with it.

Mr Osborne is expected to say: "The low inflation we see here in the UK is much more welcome than in the eurozone where inflation has been very low for some time and is now negative.

"There the debate has understandably turned to the dangers of deflation - the risk of a self-reinforcing spiral where economic activity falters, consumers defer purchases as prices fall and nominal debt burdens become ever harder to manage."

Mr Osborne will suggest the European Central Bank's inflation target could be changed so it is obliged to take action when inflation is below 2% - as well as above it.

Video: Low Inflation - Good Or Bad?

"In the UK our system is well equipped to deal with negative inflation shocks just as it dealt with the surge in commodity prices in 2010 and 2011," he will say.

He will add: "Of course we will always remain vigilant to ensure that inflation is low for the right reasons.

"But we should not confuse this welcome news for Britain's households as a result of falling oil prices with the threat of damaging deflation that we see in the eurozone.

"Rising real incomes, a recovery spreading to all parts of our economy, and family budgets that can stretch that little bit further - let's celebrate these effects of low inflation, not fear them."

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Inflation At Joint Lowest Level On Record

The annual rate of inflation has hit a 15-year low as oil costs continue to fall and supermarkets engage in a price war.

The Office for National Statistics (ONS) measured consumer price inflation (CPI) at 0.5% in December - its joint lowest level on record - slowing from a rate of 1% in the previous month.

The figure represents a further easing in the cost of living as wage growth is boosting consumer spending power and easily outpacing rises in costs.

The ONS said falling petrol prices and lower gas and electricity bills compared with a year earlier were the biggest factors pushing inflation down last month.

The cost of Brent crude is currently at six-year lows - trading on Tuesday at $45-per-barrel.

Video: Sub-£1 Petrol Boss Denies Gimmick

It represents a fall of more than half since last summer on a supply glut and fears for world economic health.

Flat household gas and electricity tariffs over the month - compared to a period last year when they were raised sharply - also made a major contribution to the drop in CPI.

Food and non-alcoholic beverages were 1.7% cheaper in December than the same month a year ago - driven by the intense price war between the major supermarkets under pressure from discounters Aldi and Lidl.

Core vegetable costs were over 7% lower.

Video: Chancellor Welcomes Inflation Drop

Motor fuels fell 10.5% year on year with the price of a litre of petrol tumbling 13.6p between December 2013 and last month, with diesel 15p lower.

The plunge in CPI to below 1% triggers a letter of explanation from Bank of England governor Mark Carney to George Osborne because it is more than 1% off the Bank's 2% inflation target.

But the Chancellor is unlikely to be worried that, ahead of May's election, prices are falling following a tough six years for voters in the wake of the financial crisis.

Price growth could ease further this month as energy firms begin to cut standard tariffs - with no sign of a rebound in oil and gas costs.

Video: Low Inflation - Good Or Bad?

The Bank had previously said it expected CPI to fall below 1% and remain there for months to come.

But the sharpness of the decline brings the UK uncomfortably close to the scenario in the eurozone, where there are fears of a damaging deflationary spiral after inflation fell to -0.2%.

Deflation, which dogged Japan for more than 25 years, is seen as dangerous economically because consumers and businesses hold off on purchases on hopes goods and services will be cheaper in future.

Mr Osborne said: "Inflation is at its lowest level in modern times.

Video: Will Inflation Drop Help Consumers?

"We have family budgets going further and the economic recovery starting to be widely felt.

"We will always remain vigilant that we have lower inflation for the right reasons and today is yet further proof our long term plan is working."

Shadow Treasury minister Shabana Mahmood said: "Plummeting global oil prices are the reason why the rate of inflation is falling here in Britain.

"But wages continue to be sluggish and the squeeze on living standards since 2010 means working people are £1,600 a year worse off under this government."

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Petrol At £1 A Litre But Not At Supermarkets

The owner of three petrol stations in the West Midlands has cut the price of unleaded petrol below £1 a litre, as supermarkets announce further reductions.

The decision to sell petrol at 99.7p by Harvest Energy garages in Birmingham, Redditch and Walsall sees sub-£1 pump prices in the UK for the first time in more than five years.

Dr Velautham Sarveswaran, who runs the stations, claims he will still make money from the move.

"The supermarkets continue to make a fortune without passing the price cuts to their customers. It is a scandal. They are cheating people," he told MailOnline.

Unleaded petrol costs hit a five-year low last week of 109.8p - with figures provided by Experian Catalist showing that average costs on Sunday had reduced further to 108.9p.

Video: Brent Crude Could Go Below $40

Diesel stood just below 115p a litre.

Analysis showed that with an unleaded price of 99.7p, 57.95p of that figure would go to the Treasury in fuel duty and a further 18.3p would be paid in VAT, with the driver paying just over 20p for the product itself.

Lower petrol prices are a consequence of the plunge in oil costs - with Brent crude losing more than 50% of its value since June last year on a supply glut and fears for the strength of the world economy.

Brent was down at fresh six-year lows of $48.8 a barrel in Monday trading.

Supermarkets confirmed further reductions to their prices - with Tesco taking 2p off their petrol and diesel costs from Monday afternoon.

Asda, Morrisons and Sainsbury's confirmed similar moves from Tuesday.

For Asda customers, the latest reduction means they will pay no more than 103.7p a litre for petrol, with diesel at 110.7p.

While motoring groups welcomed the Harvest price, the AA said it "appears to be a publicity stunt rather than a reflection of general pump prices."

Its president Edmund King added: "There remains a postcode lottery out there when it comes to fuel prices.

"Drivers in rural areas are still paying much more than the 109p average price ... It will still take some time to get down to an average of £1 per litre."

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Sellafield Clean-Up Contract To Be Torn Up

A consortium is set to be stripped of its contract to clean up western Europe's largest nuclear waste site at Sellafield following criticism of its performance.

Nuclear Management Partners (NMP), made up of US engineering group URS, British firm AMEC and French energy firm AREVA, was awarded an extension to its deal in 2013 despite accusations of delays and cost over-runs.

The Government was today expected to confirm that NMP, which employs 10,000 workers, was to have its contract terminated and the Nuclear Decommissioning Authority (NDA) would assume responsibility for the work.

The cost of making the site, on the Cumbrian coast, safe has been put at almost £80bn over 120 years.

Sellafield was used in the 1950s to make plutonium for nuclear weapons before the country's first nuclear power station was built there.

NMP was handed a 17-year contract worth £9bn in 2008.

An Energy Department spokesman said: "Ed Davey (the energy secretary) has been very clear that he's wanted to see more effective progress in decommissioning the biggest and most complex nuclear site in Europe, providing the best outcome for the taxpayer.

"The NDA and Government have been working with industry experts on alternative options."

NMP general managerIain Irving said: "We understand that the NDA has been considering whether there are alternative options to the current arrangements for managing Sellafield.

"It is not possible for us to make any further comment at this time.

"Notably, however, since the NDA awarded NMP with a five-year contract extension, the site has enjoyed one of its best ever periods of performance and progress.

"Importantly, over the last two years, we have consecutively achieved the site's best overall safety records."

But Gary Smith, national officer of the GMB union, said: "The termination of the NMP contract is welcome. We could not limp on any further.

"We said the contract should not have been extended in 2013. We understand the Tories overruled the NDA. The Government needs to be held to account.

"Hundreds of millions of pounds of taxpayers' money have been squandered as NMP has simply failed to deliver time and time again. They have been big on promises but not on delivery."

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Morrisons Boss Quits After Festive Sales Fall

By Mark Kleinman, City Editor

The chief executive of Wm Morrison is to step down after a slump in Christmas sales led the grocer's board to conclude that a leader was required to transform its fortunes.

Confirming an exclusive report on Sky News, Morrisons said that Dalton Philips would leave the company following its full-year results, with a search underway for his successor.

News of the change came as Morrisons reported Christmas trading figures which underlined its status as the also-ran among the big UK supermarket chains, with a like-for-like sales fall for the six weeks to January 4 of 5.2% including fuel.

Mr Philips said he would be leaving "a great company", adding that during his five-year tenure "many improvements [have been made] to the business and given Morrisons strong foundations for the future".

Morrisons also confirmed that Andrew Higginson, a former Tesco executive, would take over as its chairman from Sir Ian Gibson in January.

Mr Higginson said: "In the next chapter of Morrisons development, we need to return the business to growth. The board believes this is best done under new leadership. I would like to thank Dalton for his contribution as CEO. 

"He has brought great personal qualities and values to his leadership of the business, having had to manage against a background of considerable industry turmoil and change."

Mr Philips deserved "particular credit for facing into and dealing with the pricing issues that have now become evident, for taking the business into the convenience and online channels, and for the steps he has taken to modernise the Company's operating systems," Mr Higginson added.

Morrisons' like-for-like trading performance was worse than the City had forecast, and placed the company firmly in the foothills of the battle for growth, with J Sainsbury and Tesco both reporting superior figures last week.

Mr Philips, a former executive at Loblaw, Canada's biggest food retailer, became Morrisons' boss in March 2010, and also sits on the board of the Department for Business, Innovation and Skills.

During his tenure, Morrisons has struggled to modernise its business in the face of tough competition from supermarket discounters and established rivals.

Last autumn, Morrisons announced thousands of job cuts and the introduction of a new loyalty scheme in a bid to stem the decline in sales.

When asked about Mr Philips' departure on Monday night, Morrisons said it did not comment on management changes.

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US Jobless Rate Falls To 5.6% In December

The US jobless rate has tumbled to 5.6% - its lowest level since June 2008 - in a futher indication economic recovery remains on track despite weakness elsewhere.

The economy added 252,000 net new jobs last month on top of an upwardly revised jump of 353,000 in November, the Labor Department said.

The unemployment rate fell 0.2 percentage points though some of the decline reflected people leaving the labor force.

December marked the 11th straight month of payroll increases above 200,000, the longest stretch since 1994.

The data - which followed positive third quarter GDP numbers and solid industrial production and retail reports for November - suggested the economy was weathering turbulence in Europe, Japan, China and some emerging markets.

However, average hourly earnings fell 5 cents.

Wage reports have been a key factor for the Federal Reserve as it weighs the timing for an interest rate increase.

The central bank has kept its short-term interest rate near zero since December 2008.

Most economists expect that to change in June, with the outlook for wages improving at a time when gas costs are plummeting because of the dive in world oil costs.

It is hoped that more dollars in consumers' pockets will find their way into the economy.

The job figures meant that the unemployment rate fell by 1.1% across 2014 - with wider surveys suggesting that job growth was at its highest level since 1999.

Each sector saw employment growth in December - with construction jobs rising 48,000.

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