Sweden, which takes over the European Union presidency next month, is apparently lukewarm about the tough line being pursued by the EU and most major European governments. According to a report in The Guardian yesterday, the City minister Paul Myners, is off to Stockholm later this week after it emerged at the meeting of G8 finance ministers in Italy over the weekend that Sweden does not support a harsh, centralised regime for hedge funds, derivatives and private equity envisaged by the supporters of the Larosiere report, which has so far been the main reference point for the reform debate in Europe. This is probably because Sweden has a successful private equity sector that government and unions feel comfortable with and they fear that heavy-handed centralised regulation could stifle it.

I was struck by a certain naivete in FSA chairman Lord Turner's comments to The Guardian: "If one was absolutely confident that European supervision was going to be completely politics-free, in a neutral, technocratic fashion, we would be more relaxed about it". Politics-free? I don't think so. Vast sums of public money have been poured into the financial system and politicians and the public expect some accountability to go with the unprecedented response to the the business and regulatory failures that threw the world's financial system into chaos. We will be paying for this with cuts in public spending and high rates of inflation for most of the next decade so politics will play a very big part in the debate about the future of financial regulation.

Back to the European debate and it is going to be an interesting six months as the country that holds the presidency usually has alot of say over the priorities and the pace at which issues progress so you can see why Lord Myners is rushing off to smooth talk the Swedes. There is, however, pressure to maintain the pace of the reform programme and even the Financial Times lined up yesterday on the side of those who want swift, effective and lasting reform.