"London, whether others like it or not, is New York's only rival as a truly global financial center. No other center in Europe offers the same range of services: banking, insurance, fund management, law and accountancy," British Finance Minister Alistair Darling wrote in The Times on Wednesday.

His comments follow a speech by Nicolas Sarkozy on Tuesday, in which the French President expressed his joy at the appointment of fellow countryman Michel Barnier as EU Internal Market Commissioner.

In his speech, Sarkozy took aim at the City of London and blamed the Anglo-Saxon economic model for the global economic downturn.

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

In an interview with French newspaper Le Monde, Sarkozy also referred to the English as "the big losers in this affair".

Barnier attempts to smooth ruffled feathers

Barnier's appointment has raised fears among financial services leaders that the EU will push for stricter regulations at the expense of the City. And Sarkozy's gleeful speech has rankled many in Britain, who blame Prime Minister Gordon Brown for losing a diplomatic battle to prevent the French from gaining control of the key economic portfolio. Many City bankers fear that companies will leave the UK to do business in less restrictive regions such as the United States and Asia.

However, prominent British banker Sir Victor Blank told The Times that any changes to financial regulation will take years to implement, adding that he expects the City to remain an attractive location. "This is not something that will shift and change overnight," he told the paper. "The City of London has an innate strength. People want to be here."

Barnier himself was also quick to downplay Sarkozy's remarks and reassure the City's workforce.

"I know the importance of the City," Barnier said in an interview with Europe 1 radio. "I know the importance of this major financial center for growth in Britain and for all of Europe's economy. It's not my job to be nice or nasty. I have to work in Europe's interest to draw lessons from the crisis, including in the City's interest to support this financial center, as well as others.”

Earlier this year, Britain chaired the G20 meeting which stressed that tougher rules would have to be put in place to prevent another global downturn. EU finance ministers are also due to meet on Wednesday in Brussels to discuss financial regulation following the crisis.

But British Chancellor Darling pointed out ahead of Wednesday's meeting that national supervisors, such as Britain's Financial Services Authority (FSA), must remain responsible for supervising individual companies. Giving the EU extra regulatory powers in the City would be a "recipe for confusion," he said.

Darling is expected to warn other EU finance ministers that he will not accept new rules that allow European authorities to decide on future bail-outs funded by British taxpayers.

dc/afp/Reuters
Editor: Sam Edmonds