Governments’ response to the financial crisis has been compared by one senior official to that of rowdy drinkers in a bar brawl: “You wait until a fight breaks out and then take a swing at the guy you have always wanted to hit. Whether or not he had anything to do with starting the fight is not the point.” In Europe that is a pretty accurate description of how policymakers are treating hedge funds and private equity funds.

Charlie McCreevy, the internal market commissioner, has presented drafts of a directive that would impose stark restrictions on these more lightly regulated parts of the financial system. Among other things, he wants to drag funds onshore and cap leverage.