Second EU attack on City looms

Hot on the heels of the recent EU financial services directive looms a second EU attack on the hedge fund industry - the vast majority of which is based in London.

And presumably our own government, past administrations having handed over their powers to the EU, will once again find themselves too enfeebled to protect this major contributor to much-needed tax revenues.

The Evening Standard reports today that the German and French leaders have teamed up to call for a German-style ban on the practice of short-selling to be extended across the EU.

The shock unilateral move by the German government last month to ban short-selling destabilised markets and sent the values of shares, and the investments that rely on them, plunging.

The move was criticised over the instability it provoked while only being capable of suppressing a reaction to the euro's structural difficulties, rather than resolving the EU project's underlying, fundamental problems.

In a bid to block more financial institutions from betting on the failure of the EU's financial support packages, euro policies and the creditworthiness of euro countries, Angela Merkel and Nicolas Sarkozy have written a letter to Jose Manuel Barroso asking the Commission to examine a proposal for an EU-wide shorting ban covering both shares and sovereign bonds.

The pair have evidently ruled out the alternative of making the EU's actions more convincing to the markets, presumably in tacit admission of what virtually everyone else already realises.

Namely, that nothing the EU can do can solve convincingly the financial problems of various of its members while they remain locked within the fixed-exchange euro system.

The key question for us is this. Perhaps smarting from recent events, is our government going to 'man up', live up to their title, be worthy of the votes that many people so recently bothered to cast, and do what it takes to block this looming new move?

Or will they just allow themselves to be over-ruled and humiliated by the EU yet again?