France says British banks must not go back to old ways

There is no crisis between France and Britain over financial regulation but British banks must not be allowed to return to the behaviour that caused the crisis, French budget minister Eric Woerth said on Sunday.

President Nicolas Sarkozy stirred tensions between the two countries last week by boasting that the appointment of a Frenchman as the European Union's internal market chief was a "victory" for France and a loss for free-market Britain.

Britain fears the newly appointed Michel Barnier, a former French agriculture minister, will promote intrusive regulation that could undermine London as Europe's main financial centre.

"There is no reason for there to be a crisis between Paris and London, and moreover, there isn't," Woerth told Radio RCJ.

He said the British press had "as always, got wound up too quickly" by the subject.

France should be proud that Barnier got the important internal market portfolio and he would work to make sure deals reached at Group of 20 leaders meetings in London and Pittsburgh were actually put in place, he said.

"Neither American banks nor British banks can set off as they did before (the financial crisis)," he said. "We cannot straight away start to build new bubbles."

Sarkozy will meet British prime minister Gordon Brown this week in Brussels, where the pair are expected to discuss regulatory issues.

Sarklozy has repeatedly blamed the Anglo-Saxon model for the global financial crisis from which French banks emerged relatively unscathed.