(MENAFN- AFP) EU finance ministers voiced optimism Tuesday they can overcome deep-seated differences to forge a historic Banking Union to curb the excesses of the financial crisis and get the economy moving again.
At what are expected to be marathon talks in Brussels, ministers will haggle over the creation of a European-wide body to wind up failing banks and prevent them bringing down the wider economy, as happened in Ireland, Spain and Cyprus.
This body would also have a pot of emergency cash -- funded by the banking system -- to cover the costs of a collapsing lender and so avoid the taxpayer having to pick up the bill.
This 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.
However, while all agree that a so-called Single Resolution Mechanism (SRM) to close down tottering banks is necessary, it is politically tricky as it would mean handing control over national banks to Brussels.
Divisions remain on several key issues and diplomats and ministers have acknowledged that a second round of talks may be necessary to thrash out the details before EU leaders can clear the deal at a summit next week.
Firstly, there are disagreements over the mechanism's scope. The European Commission, backed by France, wants it to have the power to shut down all 6,000 eurozone 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 regional banking sector which would then not fall under EU control.
A major scrap is also looming over who controls the new body. The Commission wants to have the final say over whether and how a failing bank is wound up but Germany would prefer member states to have the last word.
Finally, there is discord over whether the fund -- which the Commission wants to total some 55 billion euros ($76 billion) over 10 years -- 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."
'Painting in' another meeting
Others, however, were less optimistic.
European Central Bank Executive Board member Joerg Asmussen said that while he saw differences narrowing, "I do not expect that we will reach a final agreement."
He said he has already pencilled in another meeting "before the EU summit" next week.
The ECB wants the mechanism to wrap up failing banks to become active at the same time its supervisory tasks come online late next year.
The ministers are under a certain amount of time pressure. Their leaders have tasked them to forge agreement before an EU summit to finalise the Banking Union on 19-20 December.
This would allow time to nail down a final proposal with the European Parliament, whose mandate ends in May.
Ministers will also attempt to reach agreement on a deposit guarantee scheme that will ensure individual savers do not lose out if a bank goes bust.
The Banking Union is compulsory for the 17 -- soon to be 18 -- countries that share the euro. Other members of the 28-nation European Union can join.
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