June 25 - The European Union will make a fresh attempt to share out the costs of future bank failures, starting a regime to spare taxpayers further bailouts. But as Ivor Bennett reports some believe a deal won't be reached and could create turmoil as leaders prepare for a key summit.
After the leaked recording of a conservation at this Irish bank, it's no wonder Germany's wary of a banking union. Top executives can be heard joking about a bailout, mocking the EU's paymaster for taking the bait. Germany fears an EU-wide banking union will mean more of the same - on the hook of other countries' debt. But the pressure to reach an agreement is growing fast. EU finance ministers failed to hammer out a deal in Luxembourg last week. Now in Brussels, it's last chance saloon. But investors have heard that before. Barclays' Will Hobbs. SOUNDBITE (English) WILL HOBBS, VP RESEARCH ECONOMICS AND STRATEGY, BARCLAYS, SAYING: "We hadn't initially expected there to be much progress until 2015 to be honest. I mean that was what we were kind of hoping for. So any progress before then we see as a positive. Markets may not agree with us for sometime. But I think our overall view of the European Union is that it's going to take possible a decade to get to where they want to be." The ECB would act as supervisor in a banking union, with all the bloc's banks under one safety net. The only problem is, who'll pay should one fail? France thinks it's up to governments to choose. But Germany's desperate to protect the EU bailout fund, and wants major depositors to shoulder the burden too. Simon Smith from FX Pro. SOUNDBITE (English) SIMON SMITH, CHIEF ECONOMIST, FXPRO, SAYING: "They still want to, are are likely, to be quite hard-ball about it. Obviously there's a German election in September. Merkel doesn't want to give too much away. They want to be very strict about the flexibility given to nations in terms of how they deal or bail-in private bond-holders etc. So they want the rules set at the beginning. Whereas others are looking for a bit more flexibility." A banking union's seen as vital to restoring economic growth to the bloc. It's already been a year in the making. And it's feared the longer its delayed the more banks will be distrusted, further prolonging a recovery. But expectations of a breakthrough are low and failure will increase pressure on Europe's leaders who meet on Thursday.