Sarkozy and Darling at odds over City regulation

It's not quite the outbreak of war, but the skirmish between France and England over the supervising of the City of London is hotting up. After gloating last week at the appointment of a Frenchman, Michael Barnier, to the post of EU commissioner in charge of internal markets - which makes him overseer of London's financial services industry - President Nicolas Sarkozy used a speech yesterday to continue his anti-Anglo-Saxon refrain.

"Do you know what it means for me to see for the first time in 50 years a French European commissioner in charge of the internal market, including financial services, including the City [of London]?" Sarkozy asked his audience in the south coast town of La-Seyne-Sur-Mer.

"I want the world to see the victory of the European model, which has nothing to do with the excesses of financial capitalism."

Sarkozy remains convinced that the "free-wheeling Anglo-Saxon" financial model, as practised in London and Wall Street, was responsible for the global economic downturn, and again hailed Barnier's appointment as a chance to "clamp down on the City".

Ahead of an EU finance ministers' meeting, Chancellor Alistair Darling responded this morning with an article in the Times in which he basically warned Barnier, Sarkozy's agriculture minister until his new appointment last week, to back off.

EU meddling in City affairs would be a "recipe for confusion" and it would be "self-defeating" to drive out business to other, less tightly regulated, jurisdictions.

Nor would Britain accept new laws that could lead to taxpayers picking up the bill for bail-outs ordered by Brussels.

Darling rejected Sarkozy's argument that the recent crisis was all the fault of the Anglo-Saxon model: he said French and German banks were among the biggest creditors of the failed US insurance giant AIG.

Lord Turner, chairman of the Financial Services Authority, tried to be diplomatic. "I'm sure Mr Barnier will be attempting to work out what is effective regulation for the good of the whole of Europe," he said in an interview yesterday on French TV. ·