In September, the European Parliament is expected to nominate its chief rapporteurs for proposed new EU rules on hedge funds, private equity and capital requirements for financial institutions.
The newly-elected EU assembly is set to play a crucial role in reshaping the initial proposals made by the Commission on these issues.
Earlier in July, the Parliament's economic affairs committee in charge of the dossier elected a British liberal, Sharon Bowles, as its chair. The appointment was widely seen as a success for the City of London and more generally for supporters of a light touch to regulating the financial sector.
A liberal, Wolf Klinz, is also tipped to chair an ad hoc committee to investigate the causes of the financial crisis, due to be established in the autumn.
Re-organisation at the European Commission
Meanwhile, France, which is spearheading a group of countries pushing for deeper regulation of the sector, is lobbying hard to grab the internal market portfolio in the new Commission.
Former Commissioner Michel Barnier is being backed by Paris for the position. If approved, Barnier's appointment would represent a U-turn in the Commission's approach to the sector, responsibility for which has so far rested with Charlie McCreevy, an Irishman widely seen as a champion of financial market de-regulation.
However, Barnier's appointment is far from certain, and it remains unclear whether financial services will remain part of the internal market portfolio or whether a specific department will be created at the Commission to deal with the increasingly busy financial market dossier.
No decisions are expected to be taken quickly, but the distribution of key positions in the next Commission will come to the fore in October if José Manuel Barroso is confirmed for a second term at the EU executive's helm after the Irish referendum on the Lisbon Treaty.
National rivalries
With the global financial and economic meltdown, regulating financial markets has taken on a strong political dimension, because it entails a fundamental review of Europe's approach to the economy.
The long-standing ideological clash between the free-market model – embodied by the UK and Ireland - and the social-market economy – spearheaded by France and Germany - has reached its peak, and centres in Europe around regulating the financial services industry.
Paris and Berlin (generally supported by Italy, Spain and most of the 'older' EU countries) have repeatedly attacked the Anglo-Saxon laissez-faire approach, which is supported by most of the EU's new Eastern countries.
Underpinning these ideological rivalries is the new balance of power that will emerge in Europe after the new regulations are passed.
France and Germany are openly challenging the rule of the City of London as Europe's main financial hub, and are keen to see Paris or Frankfurt as powerful financial centres in a new, more regulated global system.
Attacks on the hedge fund industry, which is mainly based in London, the increased importance given to the European Central Bank in financial supervision, or the emphasis on setting up clearing houses for derivatives which had thus far been freely exchanged over the counter (primarily in the City), are all seen as attempts to undermine the role of London as Europe's main financial hub.
These national rivalries – whether only suspected or taking place openly - are poisoning the legislative process and may negatively impact upon the outcome of the reform, which is seen as key for the future of Europe and its position in the emerging new world financial order.
