European Commissioner Charlie McCreevy has turned the screw on the International Accounting Standards Board, saying there was “growing concern” among European finance ministers about its response to the economic crisis. If the board doesn’t change, its funding will be cut, he threatened.

McCreevy said in a conference speech that ministers felt the IASB had an “over-academic” approach to standard setting, which many felt was “out of touch with today’s reality.”

He also announced that the Commission and European Parliament had approved his controversial plan to provide direct funding to the IASB, which currently receives money from member states directly. In a warning shot to the board, McCreevy said this funding was “conditional on further concrete improvements in governance at the Board.”

One governance change McCreevy called for was to get more people onto the IASB who had practical experience, rather than a background in accounting theory. “Accounting is now far too important to be left solely to accountants,” he said.

Alluding to IASB’s recent refusal to match a FASB position paper on impairment of financial assets, McCreevy said: “When the IASB acts or desists from doing so, this can have significant economic consequences. The IASB cannot set an agenda oblivious to economic and financial developments or fail to deliver.”

McCreevy said he didn’t want to launch a “full frontal attack” on standard setters, but added: “the call for us to back off and leave it to the standard setters just misses the point.”

The Commission was committed to the international standard-setting system, he said, and falling back on national or regional solutions was not the way forward, “even if it is sometimes tempting.” But he added that it was important for all major jurisdictions to sign up on the international system: “For us, it is now crucial that the U.S. come on board.”