BERLIN, Jan 31 (Reuters) - A senior lawmaker in German Chancellor Angela Merkel's coalition partner wants the euro zone to move faster in setting up a fund to tackle failing banks, undermining a deal agreed in Brussels after years of wrangling.
German Finance Minister Wolfgang Schaeuble had fought to keep the onus on national governments to take the lead in resolving their banks' problems.
But Carsten Schneider, the deputy parliamentary group leader of the Social Democrats, said his parliamentary bloc wanted easier decision-making rules in the 'resolution fund' for rescuing or closing failing banks and for the common fund to be built up faster.
"The aim must be to establish the fund as a European fund as quickly as possible, and to move away from the complicated interplay between the compartments and the common fund," Schneider wrote in a letter to members of the European Parliament and obtained by Reuters on Friday.
The European Union's blueprint to close failing banks foresees a "resolution fund" into which banks are to pay about 55 billion euros ($75 billion) over 10 years.
The money would be used to finance the closing of insolvent lenders, but initially, in case of a bank wind-down, each country could only use the amount its own banks contributed. The share to be used by all would increase each year.
Schneider's comments echo earlier criticisms, such as by European Parliament President Martin Schulz and by the European Central Bank, which has called for a shorter five-year mutualisation period. Schaeuble has been cool to such critics.
The resolution mechanism is part of Europe's banking union plans, its most ambitious project since the introduction of the euro.
More than five years into a financial storm that toppled banks and dragged down states from Ireland to Spain, the EU wants to build a framework to police banks and tackle their problems together.
Schneider has sometimes not toed the SPD's party line but he is the parliamentary faction's finance spokesman for the junior coalition partner in Merkel's 'grand coalition' and has held talks on the issue with EU partners.
"We want a functioning European fund which is operational as quickly as possible, preferably from the outset," Schneider wrote in his letter. "Likewise, we feel that the target size of the fund, currently 55 billion euros, seems too low."
He added that it may be an option to allow the fund to borrow on capital markets in order to start working quickly and that banks should not be allowed to deduct the levy from their taxes.
In addition, the rules on how to make decisions on the use of the fund were "complicated and difficult to implement in practice" and, while a secure legal base was needed, there may be another option than the intergovernmental approach, he said.
"Particularly in the initial years when the fund is being built up, it should be ensured that the (fund's) board is able to take decisions allowing banks to be resolved without being subject to political decisions," he wrote.
The deal is still subject to talks between the EU Commission, finance ministers and the European Parliament, from where it has come under strong criticism and which is up for election in May.
$1 = 0.7373 euros Reporting by Annika Breidthardt, Gernot Heller and Matthias Sobolewski; Writing by Annika Breidthardt; Editing by Ruth Pitchford