The City's position as a major player in global finance would not suffer from euro entry, the Treasury believes.

In a document assessing the impact on London's Square Mile, the government dismisses claims that the City's future could be in doubt inside the eurozone.

London has been at the centre of international trade for hundreds of years and many had questioned whether London could continue to compete with New York and Tokyo if the pound was abolished.

The verdict is clear; London's traders and financiers total a "critical mass" of expertise which together with foreign ownership means the City is strong enough to compete with other countries.

Fewer regulations and a willingness to use new technology has also established London as a key player.

The Treasury believes that while there are "challenges and risks" so far the euro has "not affected London's ability to compete".

The biggest danger for the City is its own attitude and future performance.

"The dynamic nature of the sector means London's performance in the last four years since the start of EMU provides no grounds for complacency," said the report.