The European Union's plan for a new machinery of financial regulation is an "opportunistic" attempt to extend EU power and is largely based on unsubstantiated claims, according to a hard-hitting report by the Adam Smith Institute and the London Business School.
The study said the British Government has responded with incoherent or irrelevant objections as Europe's elite seize on events to rush through laws that greatly increase EU control over the City of London.
"The proposals seem opportunistic, using the financial crisis to provide an opening for long-held political objectives," it said, accusing Brussels of trying to transform the financial system "while it is too weak to object".
"Since financial crises of this scale come along only every 60 years, there is no economic reason for this haste," it said.
The European Commission has made no attempt to validate its claim that lack of EU cross-border rules was a key cause of the credit crisis, ignoring evidence that the real damage stemmed from the failure of countries to enforce their existing rules properly. "Instead of dealing with the fundamental problem, the Commission is instead proposing to add new bureaucratic structures."
The key bone of contention is the creation of three new "Authorities" with a permanent staff and binding powers: a European Banking Authority in London; a European Insurance and Pensions Authority in Frankfurt; and a European Securities Authority in Paris.
While they look like the current advisory committees made up of chief regulators from the 27 member states, they are in reality executive agencies able to impose their agenda, with powers to "settle the matter" in the case of disputes. They effectively strip Britain of ultimate control over much of the City, leaving "day-to-day" matters to the Financial Services Authority.
Keith Boyfield, co-author of the report and chair of the Regulatory Evaluation Group, said the raft of proposals coming from Brussels together amount to an extremely serious assault on the City.
"When you look at this you wonder whether Alistair Darling's White Paper is a pointless exercise," he said.
The Government appears confused by the rush of events. Rather than fight the core issue of transferring control to Brussels, it has been arguing over whether the bodies should be run by the Commission or the Council. Either way, London loses ultimate control.
Gordon Brown agreed to the plans at last month's Brussels summit, provided that they do not impinge on "fiscal sovereignty". Lord Mandelson has since said Britain should forge an alliance with those EU states in our camp to limit it saying "we have more skin in this game than the rest of Europe put together".
An EU insider said the credit crisis had thrown up an unholy alliance between nationalist politicians from France, Italy and Spain hoping to chip away at the City, and Left-wing forces opposed to market capitalism.
The two together are a formidable bloc.
Moreover, Socialist Euro-MPs have forced Commission President Jose Barroso- an Iberian Thatcherite -to back their demands as the price for clearing the way for his reappointment.