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Nicolas Sarkozy has promised to hold a referendum on Europe's fiscal pact, dealing a hammer-blow to Angela Merkel's "non-negotiable" plans to impose austerity on the Eurozone. The French president, who is struggling in his bid to be re-elected, said he intended to insert the "balanced budget" rule into the French constitution, as agreed in the pact. But in a concession that will dismay the German Chancellor, he said he was prepared offer the electorate a say on the controversial issue. "If the Senate were to block the rule's adoption, then before the end of 2012 I would organise a referendum to ask the French people what they think," he said, The Telegraph writes. The European Commission is preparing a major shift in economic strategy, fearing that excessive fiscal tightening will inflict unnecessary damage on a string of Eurozone countries. Officials believe they have enough legal leeway to relax budget deficit targets for Eurozone states without violating the Stability and Growth Pact, though the plans risk a serious showdown with Germany. "The Stability Pact is not stupid. There are elements of flexibility when growth is lower than expected," said a senior Commission strategist. Current EU rules stipulate that every state must cut its deficit to 3% of GDP by next year but this is not written in stone. "So long as a country is doing its homework and taking 'effective action', we can show some flexibility," the strategist said, according to The Telegraph.Further misery was heaped on BP yesterday after Russia's state oil company unexpectedly struck a second alliance to explore the country's vast Arctic oil reserves. Rosneft will partner ENI, of Italy, to explore for oil in the Barents Sea and Black Sea. The area, covering about 50,000 sq kms, is thought to contain 36bn barrels of oil. The deal is a blow for BP, which wanted to take a big part in exploring Russia's huge untapped Arctic reserves. BP signed a deal with Rosneft last year but the alliance was blocked by a quartet of oligarchs who own half of the company's Russian joint venture TNK-BP, The Times says.Flybe is vying to take on some of its low-cost rivals by scrapping debit card booking fees and introducing more "up-market" incentives. The regional airline, which analysts believe will post a loss of about £8.5m for 2012, will on Thursday unveil plans to reposition itself away from the lower end of the travel spectrum. It hopes to gain market share from competitors such as Ryanair and easyJet by shedding some of the traits that are normally associated with no frills airlines and which it believes are unpopular with regular business and leisure travelers, The Telegraph reports.The owner of The Scotsman and the Yorkshire Post has plunged into a full-year loss and reported that a decline in advertising revenue accelerated in the first quarter. Johnston Press, which has been hit by job and classified advertising migrating online as well as by falling newspaper sales, reported a £143.8m pre-tax loss for last year, compared with a £16.5m profit in 2010. Losses swelled primarily because of a £163.7m charge relating to impairment in the value of its 225 newspapers, but the company emphasised that it had not changed forecasts for the financial performance of its titles. Advertising revenues fell by 9% to £231.3m but have declined by 10.6% over the first 15 weeks of this year, according to The Times. HSBC is to cut most of its 700 financial advisers in Britain ahead of a tougher new regulatory regime next year. The reduction of the branch-based army to a skeleton crew is expected to be announced today as part of wider plans to cut 2,000 HSBC jobs in the UK. Banks are increasingly concerned that advising ordinary customers will no longer be viable once new rules come into force on January 1. Barclays last year threw in the towel, closing Barclays Financial Products and sacking its 1,000 branch-based advisers. HSBC will not go quite as far, continuing to provide a small advice service to those prepared to pay for it. However, it expects most customers of its financial planning advisers operation to be deterred once the scale of commissions is revealed to them under the Retail Distribution Review (RDR), hence the need to scale back, The Times says. First Minister Alex Salmond asserted yesterday that "the best is yet to come" on the value of the North Sea oil industry to an independent Scotland, claiming it would bolster its credit rating in financial markets. He argued in a speech to the annual convention of the Institute of Directors in London's Docklands that independence would be good for business and the economy north of the Border. Salmond, who also heralded a new business marketing campaign launched yesterday by inward investment quango Scottish Development International (SDI), said he accepted that North Sea output was past its peak "with 60% extracted and about 40% left". But he added: "In terms of value it's the opposite." The First Minister said there was an estimated $2tn (£1.5tn) of oil to be extracted from the North Sea over the next 40 to 50 years, according to The Scotsman.AB