Crucial talks to try to break a deadlock between France and the UK over new hedge find rules have ended in acrimony.
France refused to accept a raft of compromise proposals put on the table by Belgium, which is currently the EU president. Its stubborn approach to thrashing out the new rules is said to have made enemies of several of its natural allies, most importantly Germany.
Central to the row is whether or not to grant a licence to foreign funds that want to work across the EU’s 27 countries. French economy chief Christine Lagarde had opposed this on the grounds that controls on foreign firms would be lax. George Osborne, however, is in favour of the proposals.
The spat tees up a fiery meeting between finance ministers next week.
Lagarde and Osborne are expected to engage in last-ditch talks over the weekend to try to thrash out an agreement on the shape of controls for hedge funds and private equity before the crunch finance meeting.
Continued discord could trigger a laborious mediation with the European Parliament, delaying the introduction of the symbolically important law, as well as antagonise Washington, which believes planned French curbs are protectionist.