BRUSSELS (AP) -- European finance officials face a thorny debate over how to clean up busted banks as time gets shorter to reach a deal.
They have set a year-end deadline for reaching an agreement on the next big step in their new system of tougher, centralized bank oversight.
Finance ministers at meetings Thursday and Friday in Brussels will discuss how to create a new agency that could restructure bad banks so that taxpayers don't have to pay to bail them out. It's one of several banking measures aimed at keeping troubled financial institutions from wrecking government finances and holding back economic growth.
But an agreement on the new agency has remained elusive. No deal would mean leaving the issue for a last-minute summit in December. EU officials say a deal is needed quickly so the agency can be established before the current EU parliament's term ends next year.
Diplomats in Brussels said they expected detailed and intensive discussion — but that a final agreement was not likely.
Key issues include setting up a centralized fund — to be filled by levies on banks ahead of time, along the lines of the U.S. Federal Deposit Insurance Corporation — so that the new agency can provide money to carry a failed bank over until it is restructured as a viable one.
Germany, the EU's largest member, says setting up such a fund would mean a years-long effort to change the basic EU treaty. Berlin wants to rely instead on a network of existing national bank authorities.
The European Central Bank, on the other hand, says no treaty change is required. The ECB has pressed to have the agency, dubbed the single resolution mechanism, set up by the end of next year. That means it would be in place when the ECB takes over as the centralized banking supervisor. It would be able to declare a bank in danger of failing — but without the resolution agency in place, there would be no new way to step in and clean up the mess. Previous bank failures have been handled by national officials.
The resolution agency and ECB oversight are part of so-called "banking union." That is an effort to toughen banking oversight by centralizing it. National bank regulators are regarded as having been too easy on their home banks, allowing problems to fester. Banks that are still burdened by losses from more than five years of financial turmoil and recession are holding back the European economy because they can't lend more to businesses. And, bank bailouts can threaten government finances; Ireland needed to be bailed out in 2010 due to the costs of supporting its troubled banks.
Ireland is slated to leave its bailout program later this month. The cabinet decided Thursday not to ask for an additional standby credit from other eurozone governments that it could have tapped in case of trouble, saying its finances are in good enough shape to make it without one.
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