City A.M. Reporter
FEARS are growing in the City that a weakened UK government may not be able to fight off strict European Union proposals to regulate the financial services sector.<br /><br />The UK government, led by chancellor Alistair Darling, has spent the last few weeks battling plans for the European Central Bank to take charge of a new a pan-European financial stability regulator. <br /><br />But City figures are concerned that Labour party leadership infighting over Prime Minister Gordon Brown and the expenses row has distracted the government. <br /><br />Several senior figures in the City have told City A.M. they are worried the Treasury has been distracted over these major issues because of internal government wrangling.<br /><br />The government is also jockeying for position over the allocation of economic portfolios at the next European Commission, which could come up as early as this autumn. <br /><br />The UK currently holds the trade portfolio, and there would be worries if France won a portfolio with direct influence over financial regulation.