* Divisions remain over agency and fund to close banks
* Germany agrees to link national funds but only after 10
* Minister to push for early rules to impose losses on
By Annika Breidthardt and John O'Donnell
BRUSSELS, Dec 11 Euro zone countries edged
toward agreeing a plan to tackle ailing banks on Tuesday but
divisions remain about key parts of the reform that is needed to
underpin confidence in the bloc's lenders.
After a financial storm that toppled banks and dragged down
states from Ireland to Spain, countries are considering a fresh
blueprint outlining what to do when a bank fails, a critical
second pillar of a wider reform dubbed banking union.
Sealing a deal ahead of next week's meeting of EU leaders
will allow Germany's Chancellor Angela Merkel and her peers to
trumpet an important overhaul of banking although their
readiness to share the costs of failed lenders, a central tenet
of banking union, may fall short of what was hoped.
A draft plan, circulated among EU ministers at a meeting in
Brussels, spells out how a new agency may close failing banks
chiefly in the euro zone and, crucially, how the cost can be
shared out among different national funds in the scheme.
Linking these funds will take 10 years, however, and it will
fall to countries to cover the costs in the mean time.
Significant divisions remain. A quick succession of daily
meetings have been planned to seal agreement when the ministers
meet on the eve of the leaders' two-day summit on Dec. 19-20.
"We have sent a common signal to the markets that the
European banking sector is stable," Wolfgang Schaeuble,
Germany's finance minister, told reporters.
"Europe is a bit more complicated than the United States but
... we have found a solution," he said, adding, however, that a
ministers' meeting next week was needed to finalise the
agreement. "Nothing is agreed until everything is agreed."
The new agency to shut banks and a fund to pay for the
clean-up will form a second pillar of banking union, as soon as
the European Central Bank starts supervising banks late next
Stronger countries in the euro zone do not assist weaker
ones with direct financial support. Germany, Europe's strongest
economy, is reluctant to set a precedent by helping repair banks
in struggling countries such as Spain.
On Tuesday, Schaeuble emphasised that it was down to
countries to individually shoulder the burden.
To complicate matters further, Germany wants a new treaty
agreement between governments in the scheme, a step that could
France's Finance Minister Pierre Moscovici said that the
basis for an agreement had been reached, a view echoed by Michel
Barnier, the European commissioner responsible for the law.
But two officials inside the meeting painted a bleak
picture. "There are more questions than answers," said one.
Sealing an accord next week is crucial in drawing a line
under a financial crisis that first struck Europe more than five
years ago with the near-collapse of Germany's IKB.
But building this union is proving divisive as it requires
countries to surrender sovereignty and may force them to pay
toward repairing banks in neighbouring states.
SHARING THE COST
Winning German's support will also require countries to back
an early introduction of rules to impose losses on senior
bondholders and large depositors in failing banks, as was done
Germany has long called for such a fast-tracking of rules,
which were originally planned only for 2018.
In the draft paper, officials proposed a starting date of
January 2016, an acceleration that would have significant
implications for bondholders as well as savers with more than
100,000 euros ($137,200) in their accounts.
A deal among governments on how to wind down banks by the
self-imposed year-end deadline is important because it will
allow countries to address potential problems revealed by a
health check of banks by the ECB next year.
Failure to reach agreement would reflect badly on the bloc's
politicians, whose response to the crisis has at times been slow
For the bank union to work, an agency has to get the power
to close down a bank.
But Germany, Finland and Slovakia want the final say to go
to the European Union's 28 ministers if needed, a process that
could bog down attempts to make quick decisions in an emergency.
The draft proposal leaves a question over the issue,
proposing a number of different and often unwieldy options when
taking the decision to close a troubled bank. Barnier warned
that the process proposed was too complex.