"European Union finance ministers are under pressure to agree who pays for failing banks after failing to reach a deal last week, with Germany and France at odds on how to distribute the costs.
The law on rescuing and closing banks in the EU is central to the 27-nation bloc's banking union, which aims to prevent future financial crises and get the economy out of recession.
It is also a highly controversial element as it will dictate who decides what happens to a failing bank and who is to pay for it, bringing national sensitivities to the fore.
After talks failed last Friday following almost 20 hours of talks, EU leaders have asked for a deal on the directive by Thursday and talks have been scheduled for Wednesday.
Any slippage could further set back the banking union project, which has been delayed twice because of the complexity of negotiations between EU governments and institutions.
Ever since banking union started to take shape in mid-2012, Germany has been wary, concerned that as the currency union's largest and most powerful economy, it will end up on the hook for other countries' debts if a single, EU-wide system for sorting out problems is put in place.
While there is no immediate deadline for an agreement, the risk of a negative market reaction to another failure has been growing since the U.S. Federal Reserve made clear that it might not be printing any more money by this time next year.
Adding to the pressure are rising peripheral euro zone borrowing costs, which threaten to reignite the sovereign debt crisis, in abeyance since the European Central Bank declared it could buy unlimited amounts of bonds.
"Failure to comply with this agenda would cast serious doubt on the ability of European member states to implement the banking union on time, and would undermine its credibility, with possible adverse impacts on bank funding costs," British bank Barclays said in a research note to clients"
Source: Reuters.
