Angela Merkel's conservatives and the Social Democrats (SPD) have struck a deal on the contours of a European banking union under which a body attached to European finance ministers, not the European Commission, would decide when to close failing banks. Several sources involved in coalition talks between the parties told Reuters the two camps had also agreed funds from the European Stability Mechanism (ESM) should not be directly available for winding down financial institutions.
The sources said a number of legal questions needed to be resolved, but the goal is to sign off on the agreement early next week so Finance Minister Wolfgang Schaeuble can go to a meeting with his EU colleagues on Thursday with a firm German position on the issue. The EU wants to agree a deal on bank resolution by year end, but uncertainty over Berlin's stance after September's election that led to complex coalition talks has sowed doubts about whether it can meet the deadline.
In Berlin, an SPD spokesman said there was no deal yet: "The talks on this issue are going full steam ahead. Both parties are still far from an agreement on the questions of procedure and content," SPD spokesman Benjamin Seifert said. In Brussels, the EU had no immediate comment. The so-called Single Resolution Mechanism (SRM) is a pillar of a broader banking union that aims to break the "doom loop" between failing banks and sovereign governments - a major problem for the euro zone during its debt crisis.