CITY minister Lord Myners yesterday lashed out at a draft European law that will crack down on hedge funds, saying it needed &ldquo;major surgery&rdquo; before the UK could support it.<br /><br />In a powerful speech, Myners threw his weight behind London&rsquo;s hedge fund managers who are aghast at European plans to regulate the industry with an iron fist.<br /><br />He criticised European countries for making &ldquo;political capital&rdquo; by scapegoating hedge funds and said the actions of some member states had been &ldquo;woefully short-sighted&rdquo; and &ldquo;bordering on a weak form of protectionism&rdquo;.<br /><br />Although the City minister said he did not object to regulation per se, he echoed concerns that certain countries &ndash; such as France and Germany &ndash; are lobbying for a clampdown because it won&rsquo;t affect their own economies while ignoring widespread acceptance that hedge funds did not cause the financial crisis.<br /><br />&ldquo;It is perhaps easy for other European countries to make political capital out of demanding intrusive regulation of an industry of which they have little or no direct experience,&rdquo; he said.<br /><br />London, which is home to at least 80 per cent of Europe&rsquo;s $400bn (&pound;248bn) in hedge fund assets, stands to lose the most from plans to introduce a tough disclosure regime and to impose minimum capital requirements and leverage limits on managers with assets worth more than &euro;100m (&pound;86.3m).<br /><br />Myners pledged to spend the summer lobbying European states to gain support for a drastic overhaul of the bill and is privately hopeful that the UK can win major concessions.<br /><br />The minister is also attempting to enlist the US as an ally, arguing that its own hedge funds could lose out because the new law would mean that certain American funds could not be sold in European Union.<br /><br />Myners said that such a situation would &ldquo;come at a direct cost to pension savers and others&rdquo;.<br /><br />Meanwhile, Darling&rsquo;s white paper on financial regulation could give the FSA emergency powers to impose leverage limits on systemically important funds, potentially warding off the European plans to introduce a industry-wide cap on leverage.<br /><br />Also speaking yesterday, Investment Management Association chairman Robert Jenkins hit out at the plans, saying hedge fund critics are &ldquo;determined to shoot a key part of the money management industry in the back and themselves in the foot&rdquo;.