Telegraph: UK 'powerless' to stop EU regulation

UK 'powerless' to stop EU regulation

A senior French official has confirmed Gordon Brown is almost powerless to stop the creation of a European regulatory machinery at today's EU summit, opening the way for a transfer of control over the City from London to Brussels.

"There will be a pincer movement on Britain," said a key aide to President Nicolas Sarkozy, speaking at a pre-summit briefing.

Paris believes the push for tighter regulation by the Obama administration leaves Britain in a weak position as it tries to fight off the assault on the City.

"If the Americans make strong commitments towards regulation and on derivatives and other sophisticated products, I believe they are going further than the Europeans. That will provide a boost to the most determined among the Europeans," said the official.

"It will be a reminder to the British that they cannot be quite isolated within Europe and at the same time refuse to accept for the City the kind of rules being imposed on Wall Street. "

Europe's key proposal is for three new bodies to oversee banking, insurance and securities. Each would rank as EU "authorities" and have binding powers to dictate decisions over sweeping areas of regulation.

Britain cannot veto the proposals because EU single market laws are passed by qualified majority voting (QMV). While a few countries have reservations – Germany views the plan as "too ambitious" – London will struggle to put together a blocking minority.

It would be a serious political matter if the EU proceeded against vehement objections from the British Government. Any outcome depends on whether Mr Brown is willing to risk a showdown with Europe.

Chancellor Alistair Darling said Britain will not agree to any measures that erode "fiscal sovereignty", an area that is still covered by the national veto.