Top European Union officials hit back on Thursday at criticism from Tim Geithner, US Treasury secretary, who has accused Brussels of pushing ahead with rules to regulate managers of hedge funds and other alternative investment funds that could be protectionist.

A spokesman for Michel Barnier, the new EU internal market commissioner who is responsible for financial services regulation and to whom Mr Geithner addressed his concerns, said that the EU decision to act on hedge funds was in line with a G20 decision to reinforce transparency in the financial system.

He added that the new commissioner wanted to “work closely” with the US, to ensure “robust standards” in financial services. Mr Barnier is due to visit the US shortly, although no final date has been set.

The spat comes at a sensitive time. Diplomats from the 27 EU member states again failed on Thursday to agree a compromise package for regulating hedge funds and private equity funds on a pan-EU basis.

Countries unhappy with aspects of the proposed text are thought to have included Ireland, the Czech Republic, Malta, Sweden and Finland.

The latest setback comes after lengthy discussions that have now been under way for about six months.

However, Spain, which holds the rotating EU presidency, is understood to be anxious to take a text to a scheduled meeting of EU finance ministers next Tuesday. Further negotiation and efforts at finessing the text are expected to continue over the weekend.