D-Day then for the Alternative Investment Fund Management (AIFM) directive, which the EU's Economic and Financial Affairs Council (Ecofin) will attempt to finalise this afternoon. France and Germany continue to insist that the directive should proceed mostly unamended, while the UK, where great parts of the EU's hedge fund and venture capital industries are based, is increasingly panic-stricken.
The intervention of US Treasury Secretary, Timothy Geithner, at the weekend shows just how high the stakes have become. In a letter to Ecofin, Mr Geithner as good as promised retaliatory action should the AIFM directive come into force in its current form. Those rules would see non-EU based funds barred from doing business in the EU unless they comply with the letter of the directive. The US would then be likely to introduce an almost identical rule governing its markets.
Leaving aside the US warning – and the threat to London, the EU's dominant financial services market – this directive gets it wrong because it oversteps the remit of the single market. Within reason, EU member states have primary responsibility for policing the activities of their own financial sectors. So if the UK's Financial Services Authority is satisfied that US hedge funds based here – and then marketing their services across Europe – are safe, that should be enough for the EU.
The ridiculous thing about this argument is that hedge funds – let alone the private equity and venture capital industries – in no way pose a serious systemic financial risk. We know this not least because a string of hedge funds, large and small, have collapsed over the past couple of years without plunging the world into a fresh financial crisis.