Outlook: Court kicks sand into Super Mario's face over holiday deal

Fifty-year mortgages; More banking cuts Ê

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European competition policy faces scrutiny as court overturns Airtours bid

Travel shares take off as investors gamble on consolidation

Industry wins temporary stay on rates rise

Leading article: The case for doing nothing now, and being unpopular later

UBS Warburg to axe 13% of investment banking staff in London

It was a severe case of uevo on viso yesterday for Mario Monti, Europe's competition commissioner. Having blocked the £950m Airtours bid for First Choice Holidays just days after taking office three years ago, his decision has now been overturned by the curiously named European Court of First Instance. It rather tarnishes the tough-guy image of "Super Mario" and is likely to lead to a wide-ranging shake-up of the way mergers and acquisitions judgments are arrived at. In short, it is no bad thing.

Indeed it is not just Super Mario who is wiping the egg off his face. It was his predecessor Karel van Miert who had wanted a test case for the European Commission's decision-making power on European deals. The Airtours-First Choice bid just happened to appear on the radar at the wrong time and was duly shot down in flames.

Those with long memories might recall this column argued at the time that Airtours-First Choice seemed a dead cert to be blocked and that First Choice shareholders would be better off voting for the merger with Kuoni. But that's water under the bridge now.

What we have here is a court ruling which vindicates what many of Super Mario's critics have been saying for some time. They have argued that Mr Mario's mergers taskforce is unpredictable, lacks rigour and operates with the same set of people serving as prosecutor, judge and jury.

The court ruling was damning in the extreme. It judged that Mr Monti's department failed to prove three key counts of whether the Airtours-First Choice combination would lead to "collective dominance" of the UK package holiday market.

The ruling has important implications. First, there is likely to be a flurry of activity as companies revisit deals that were blocked. These could include Bertelsmann-EMI (EMI shares topped the FTSE 100 risers yesterday) and GE-Honeywell.

Second, the merger and acquisitions taskforce of the European Commission will now be overhauled. A Green paper has already been prepared in Brussels which proposes replacing the current "dominance" test with a US-style approach that judges deals on whether they will lead to reduced competition. What we are likely to see in addition is a "re-skilling" of the commission's personnel with more economists, lawyers and accountants who specialise in competition matters rather than the ranks of generalists who stalk the commissions' corridors now. Independent adjudicators are also likely to be introduced to the system.

With the commission under pressure to be more rigorous in its decision-making when the new rules are introduced later this year companies might decide to get their deals in now rather than wait for a potentially tougher regime.

What all this means for Airtours-First Choice is anyone's guess but shares in both companies rose sharply on the possibility of a deal. Airtours, now called MyTravel, is in such as state at the moment that it cannot bid for anybody. First Choice, on the other hand, is in a much stronger position. It has a more highly regarded management led by Peter Long and might like to avenge two attempted bids from its arch rival, first in 1993, when First Choice was called Owners Abroad and again in 1999. Over to you, Mr Long.

Fifty-year mortgages

Homeowners may have won a reprieve yesterday with the Monetary Policy Committee's decision to keep interest rates on hold. But could another spectre be looming in the shape of the never-ending mortgage? One broker has raised the prospect of the 30, 40, even 50-year home loan as buyers find new ways of scrambling on to Britain's soaring property market. John Charcol says that as pay rises fail to keep pace with increasing property prices, potential buyers may start look at new ways of financing their homes. One possibility, the firm says, is to increase the length of the term, from the standard 25 years to something much longer. Indeed, longer-term loans are already available from the likes of Abbey National and Nationwide.

Who would one want one of these things, you might wonder. Well, few people would actually want one but some may not have a choice. The logic here is that spreading the loan over a longer period reduces the monthly payments, making them more affordable. This is particularly attractive to first-time buyers, who may find this the only way of gaining a foothold on the first rung of the property ladder.

Inevitably though, there is a sting in the tail. In times of high inflation, the value of the mortgage debt is gradually eroded as income rises. In lower inflation eras such as the current one, the burden of the debt lasts longer. Extending the term of the mortgage as well would make it seem even more of a life sentence. Homeowners would also be paying more for their property as they would be paying more interest.

A further problem is that banks and building societies are likely to be at their most reluctant to make longer loans available to first-time buyers who have no payment record and therefore present a higher risk. Offering longer mortgages to more mature buyers may push the duration of the term beyond the working life of the homeowner. It doesn't look very attractive.

Perhaps the biggest risk is that longer loans would remove one of the natural restraints on Britain's soaring house prices. Indeed, it would be like throwing petrol on the fire. Currently, economists are saying that the sheer lack of affordability of houses, particularly in London and the South-east, will be one of the factors that will eventually rein prices in. Take that away and prices will soar yet further. Is that really what we want?

More banking cuts

UBS Warburg has become the latest high-profile investment bank to admit that its staff are twiddling their thumbs waiting for the recovery in corporate activity that is being shunted into the ever-more distant future. Some 13 per cent of its London-based bankers are leaving.

A little over a year ago, investment banks were publicly dismissing the idea that any sort of cutbacks were in the offing, even though the bear market was already established. Privately, it was another matter. As one float after another was pulled, and mergers and acquisitions were put on hold, bankers knew it was inevitable that the City would have to pay for the excesses of the dot.com boom with redundancies. The only question was which bank was going to swallow its pride and move first.

Vanity has since given way to commercial reality. But only recently have the cuts got under way. UBS's latest round of departures includes graduates fresh from their two-year training scheme – a dead giveaway that the bank is not expecting the upturn to be terribly marked when it eventually comes. Even the "cheapest" staff cannot consider themselves immune from the axe.

Given the massive diversion of wealth from ordinary investors and pension funds into vast City bonuses during the internet boom, few in the wider world will shed a tear. If there is a worry, it surrounds the impact of the collapse in the Square Mile on the wider economy. The effect of City job losses is already apparent in plunging rents in London, and steep falls in property prices at the top end of the market. A contraction was inevitable. It is far from clear where it will end.

n.cope@independent.co.uk