Summary The aim is to create a pan-European body that can wind up failing lenders.
BRUSSELS (AFP) - EU finance ministers on Tuesday edged towards a difficult compromise on a Banking Union they hope will prevent a repeat of crippling crises and inject new impetus into the economy.
Ministers voiced optimism they would reach a "political accord" during what are expected to be marathon talks in Brussels but several predicted a further emergency meeting would be needed to thrash out the details.
The aim is to create a pan-European body that can wind up failing lenders and stop damage in the banking sector bleeding through into the real economy.
This body -- dubbed the Single Resolution Mechanism (SRM) -- would also have a pot of cash at its disposal to deal with the costs of collapsed banks so the taxpayer does not have to pick up the bill, a situation which forced Ireland and Cyprus to seek international bailouts.
The SRM would go hand-in-hand with an already agreed supervisory mechanism under which the European Central Bank will scrutinise the top 130 or so eurozone banks directly and thousands more indirectly via national authorities.
"I think there are strong chances to have a deal today," said Lithuania s finance minister, Rimantas Sadzius, who is chairing the talks in Brussels.
"Whether this will be the final legal regulation or not, we will see, but we must have a deal," Sadzius added.
While all agree on the need for a body to close down tottering banks, it is politically tricky as it would mean handing control over national banks to Brussels.
Divisions remain on several key issues.
Firstly, there are disagreements over the mechanism s scope. The European Commission, backed by France, wants it to have the power to shut down any of the eurozone s 6,000 banks if they get into difficulties.
However, European powerhouse Germany believes the mechanism should have jurisdiction only over the 130 top banks under ECB supervision -- perhaps with an eye on its own regional banking sector which would then not fall under EU control.
Ministers are also scrapping over who controls the new body. The Commission wants the final say over whether and how a failing bank is wound up but Germany would prefer the last word to lie with member states.
Finally, there is discord over whether the fund -- which the Commission wants to total some 55 billion euros ($76 billion) -- should be a centralised European pot or come under national control.
French Finance Minister Pierre Moscovici appeared to signal a compromise on this thorny issue as he entered the talks Tuesday.
"The resolution fund has to be a genuinely single fund ... with the same rules for everyone and coordinated decision mechanisms ... which is capable of responding to difficult situations of bankruptcy," Moscovici told reporters.
But he suggested this fund could be made up of "national mechanisms initially with a transition phase" leading eventually to a pan-European pot.
"We are constantly moving forward. I think we have today the elements to work out a political agreement."
