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banking crisis

EU ministers in final push for compromise on bank wind-down

German Finance Minister Wolfgang Schaeuble,left, and Eurogroup President Dutch Finance Minister Jeroen Dijsselbloem (EPA photo)

German Finance Minister Wolfgang Schaeuble,left, and Eurogroup President Dutch Finance Minister Jeroen Dijsselbloem (EPA photo)

Brussels - European Union finance ministers were set Tuesday for hours of wrangling over a new scheme to wind down the eurozone's troubled banks, as pressure mounted for a compromise to be found by the end of the year.

The much-touted measure is meant to prevent taxpayers from having to contribute to the banks’ bailouts. It would be the second pillar of a crisis-thwarting banking union, which is considered key to restore trust in the eurozone.

Observers have warned that without a speedy compromise, the wind-down scheme could be put on ice through most of 2014 because of upcoming European elections.

This has stoked fears that instability could return to the eurozone just as it slowly recovers from a prolonged recession. In addition, a new round of stress tests is planned for next year, and this could theoretically uncover fresh problems in the bloc’s largest banks.

"Banking union ... is not a dreamy project, it is indispensable," Italian Prime Minister Enrico Letta had said on Monday. "Without a banking union, Europe plunged in a crisis."

"Delaying decisions and maintaining entrenched positions at this stage is not to the benefit of anyone," Cypriot Finance Minister Harris Georgiades added.

But as is often the case in the EU, the devil is in the details.

"It’s a subject that is very complicated - legally, economically, financially," said the EU’s market regulation commissioner, Michel Barnier. "We are not there yet."

Economic heavyweight Germany has been posing the biggest challenge, questioning everything from the new system’s legal basis and which banks it would cover to who would have a say in a troubled lender’s restructuring or closure.

Berlin had initially contended that existing EU treaties do not allow for anything more than a network of national resolution authorities.

French Finance Minister Pierre Moscovici on Tuesday spoke of a set-up that could "initially leave room for national mechanisms," with a transition period until a eurozone-level scheme is implemented.

"We have worked assiduously to achieve a political agreement still in this year," German Finance Minister Wolfgang Schaeuble had told journalists in Brussels a day earlier. "The opportunity is there, but it will still be a lot of work."

Tuesday’s talks are expected to stretch late into the night.

Speculation is also rife that the 28 ministers will have to call a special meeting on December 18 to finalize a compromise - just one day before EU leaders are set to assess their progress.

"I would expect that we will manage to narrow down the differences today, ... but I do not expect that we reach a final agreement already," said ECB board member Joerg Asmussen, who is taking part in the negotiations.

At the same meeting, the ministers are also set to tackle a promised clamp-down on tax cheats. But little progress is expected, with Austria and Luxembourg unlikely to budge on plans for more

information-sharing on account holders and their revenues.

The two banking-secrecy stalwarts have justified their position by pointing to the fact that the European Union has yet to reach such agreements with outside financial hubs such as Switzerland and Liechtenstein.

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