Most EU bank union work can be done without law change: Eurogroup head

The euro zone's top project to boost economic growth - banking union - will not be delayed for now by a row over whether it needs EU law changed because most of the work can be done before this is settled, a senior euro zone official said on Saturday.

Jeroen Dijsselbloem, the Dutch finance minister who chairs the monthly meetings of his euro zone colleagues, said the dispute on the legal requirements of the banking union can go in parallel with more technical work on how it would function.

"I am, in a sense, relaxed about it, because I know that we can push forward at least 80-90 pct of the project," Dijsselbloem told a news conference on the sidelines of the spring meeting of the International Monetary Fund.

The EU has already made the first step - it agreed the European Central Bank would take over the supervision of all banks in the euro zone from July 2014 in what is called the Single Supervisory Mechanism.

Dijsselbloem said the 17 countries using the euro can also move ahead with further harmonizing deposit guarantee programs, and creating rules on when the euro zone bailout fund, the European Stability Mechanism, or ESM, can buy a stake in a euro zone bank to boost its capital when no-one else can or wants to.

The euro zone will also create a network of national authorities responsible for closing down failing banks that will operate under the same rules.

It is the next step that becomes difficult.

The euro zone wants to transform the network of national resolution authorities into a single European institution that would decide which euro zone banks will be closed.

It would also have the ESM fund to pay for the process, until enough fees from banks accrue to cover any potential expense. The ambitious plan was for such a single resolution mechanism to be in place in 2014.

However, Germany, the euro zone's biggest economy, faces elections in September. It believes that to create such an authority, which could order the closure of a German bank, or use German taxpayers' money to pay for the closure of a bank elsewhere in the euro zone, EU laws have to be changed.

The European Commission, the executive arm of the European Union, says existing law provides sufficient basis.

"The crucial point is: can we have a single resolution authority - this is where the Germans feel a treaty change is needed to have a stronger legal basis," Dijsselbloem said.

A change of European Union treaties would substantially delay the launch of the banking union because apart from the time needed to negotiate the amendments it would also require time for parliaments of the 27 EU countries to ratify it.

There would also be a risk that the ratification fails in one or more countries and that some EU governments would use the opportunity to trade their support for concessions in other areas, opening the door to long and difficult negotiations.

But Dijsselbloem said the problem could be solved later.

"90 percent of the project can be pushed forward and there is a lot of work to be done there, so as far as I am concerned there is not going to be any delay," he said.

"We are going to work on these elements and in parallel have this debate if we need treaty change, what do we need to fix in this treaty change. We can do that in parallel while putting all the building blocks in place. So we might not lose any time."

(Reporting By Jan Strupczewski; Editing by Neil Stempleman)