The European Commission has picked a fight with the British government in the wake of UK Prime Minister David Cameron's decision last week to veto moves to change the EU treaties to deliver deeper centralisation of fiscal policy-making.

Economic and monetary affairs commissioner Olli Rehn on Monday (12 December) warned the UK that the City of London could not escape expanded European regulation of the financial sector and insisted that Brussels is on firm legal ground in the use of the EU institutions to police the new 'fiscal compact' - an intergovernmental agreement that Britain decided not to sign up to.

"If this move was intended to prevent bankers and financial corporations of the City from being regulated, that's not going to happen," he told reporters in Brussels.

"We must all draw the lessons from the ongoing crisis and help to solve it and this goes for the financial sector as well."

The commissioner spoke as he unveiled the formal entry into force of a package of six pieces of EU legislation that delivers greater oversight and vetting of national budget-making processes.

While the UK remains exempt from some of the sanctions and fines that can be applied to eurozone states, the government must still submit its fiscal plans for surveillance by Brussels.

"I would also like to remind you that the UK government has also supported and approved the six-pack of new rules tightening fiscal and economic surveillance which enters into force on Tuesday. The UK's excessive deficit and debt will be the subject of surveillance like other member states, even if the enforcement mechanism mostly applies to the euro area member states," he noted.

Following the UK's decision to refrain from signing up to the fiscal compact, analysts have speculated as to whether the European Commission and the European Court of Justice (ECJ) can be deployed to monitor and enforce the new agreement.

Commission officials last week said that while the legal grounds for the intervention of the EU institutions as the guardians of non-EU but still European intergovernmental formations are firm and date back to an ECJ decision in 1993 - concerning international aid to Bangladesh - there remain many obstacles, and one of the main conditions laid out at the time was that all 27 EU states must give their permission.

It remains an open question as to whether the UK will give the nod to such a move. On Friday, Cameron told reporters in Brussels that the institutions could not be used in this way.

The EU executive now says however, that there is no legal barrier to such a deployment of the EU institutions.

Referring to the body’s internal legal advice, Rehn said: "I am happy that the role of the [EU's] institutions was recognised and reinforced."

"The speculation of some media that the treaty is not enforceable is unfounded. The result we got at the summit was better than some suggested - bold, effective and legally viable."

The commissioner also said that he "regretted" the UK move.

"I regret very much that the United Kingdom was not willing to join the new fiscal compact; I regret it as much for the sake of Europe and its crisis response, as for the sake of British citizens and their perspectives," he said.

"We want a strong and constructive Britain in Europe and we want Britain to be at the centre of Europe and not on the sidelines."