EUROPEAN finance ministers worked late last night to reach a compromise agreement on new pan-European rules for winding up failed banks against the backdrop of a looming year-end deadline.
Ministers rushed to try and reach some form of political deal last night, amid speculation that the finer legal details would be thrashed out at a later date ahead of a summit of European leaders just days before Christmas.
The discussions form part of wider talks on ambitious plans for banking union, with just one element of the three-pillar plan so far agreed.
The politicians are debating who should be responsible for deciding when a bank is too troubled to be saved, and who should foot the cost in the event a bank needs to be shut down.
But differences exist.
Germany has questioned a proposal allowing the European Commission to have the power to decide, but reports yesterday suggested the country may be softening its stance.
The Single Resolution Mechanism (SRM) plan, drawn up by the Commission, would also see a common European fund being established, funded by levies imposed on the banks, to pay for any costs. But it won't be up and running for years, leaving questions about who should pay in the interim.
Most ministers, including Ireland's, agree such last-resort help for the SRM should come directly from the eurozone bailout fund the European Stability Mechanism (ESM), with no involvement of governments.
Germany opposes the idea, insisting there should be a network of national funds, and, if needed, borrow from the ESM.
ECB Governing Council member Joerg Asmussen believed an emergency gathering of finance ministers would be needed prior to the EU summit on December 19 for agreement.
A deal is needed by the end of the year because a failure to meet the deadline could result in delays in implementation because of European Parliament elections and changes in the makeup of the Commission.