Bank levy

The meeting at the Chancellery focused on how the country's banks can be made to share the burden of the financial crisis but Merkel was also keen to resolve some outstanding issues about Greece's budget crisis and how to get the coalition back on track.

German Finance Minister Wolfgang Schaeuble attended the meeting in Berlin along with parliamentary faction leaders of the three political parties that form the ruling coalition. And in a rare show of unity, the coalition partners appear to have agreed that the banks will have to pay.

"Things are beginning to take shape," Foreign Minister Westerwelle of the FDP said after the talks. "We made some significant progress on regulating the banking sector and reminding the banks of their responsibility."

Finance Minister Schaeuble suggested what he called "a kind of insurance" for future banking crises.

"What we're thinking about is that we could make the banks contribute to a fund. The details still need to be worked out but such a fund could in the future help shoulder the reconstruction costs which would occur in future crises."

International debate

The plans echo those of the European Commission. Internal markets commissioner Michel Barnier last week called for a similar fund as an insurance policy for future bank failures.

In the US, President Barack Obama has proposed a 'Financial Crisis Responsibility Fee' - essentially a tax on banks' liabilities, to deal with potential future bank failures.

In the UK, which is home to Europe's biggest banking sector, the ruling Labour party is at loggerheads with the opposition Conservatives over the issue ahead of national elections in May.

Labour is anxious not to burden the banks too much, as the sector is a big employer in Britain. The Conservatives argue that a bank levy is only fair after taxpayers' money was used to bail out several British banks. More details on the UK government's plans on regulation are expected in Wednesday's budget.

What is clear is that a global solution to regulation is best, but most countries, including Germany, are aware that consensus on this issue will be hard to come by.

Next month, the International Monetary Fund (IMF) will attempt to find a global blueprint, when it presents its proposals for banking regulation to the G20 group of states.

Greek debt crisis

Ahead of next week's EU summit, the coalition talks also focused on discussions about the Greek debt crisis. In a telephone call ahead of the talks Greek Prime Minister George Papandreou told Chancellor Merkel that Athens does not need financial support.

"Greece wants to know that if something happens it has a certain degree of clarity on the issue, but I'll repeat what I've said before: the best solution for the euro is if Greece can solve its own problems - of course with the support of the European Union", said Merkel in an interview with Deutschlandfunk radio on Sunday.

"The issue of Greece is not a question of financial support, but how to help Greece get itself out of a precarious situation," said FDP parliamentary leader Birgit Homburger.

President criticizes government

The coalition talks came ahead of a key state election in North Rhine-Westphalia and some harsh words from German President Horst Koehler.

Koehler voiced surprisingly strong criticism of the government over the weekend, saying the coalition had not lived up to expectations after comfortably winning last September's federal elections.

"The first few months were disappointing. The good thing is, the parties concerned know this themselves," Koehler told Focus news magazine, calling for "a new departure towards reform."

nrt/ng/dpa/Reuters/AFP
Editor: Andreas Illmer