Germans give ground on banking union Germany on Wednesday evening agreed to lay the foundations for a eurozone banking union but warned that creating a common bank supervisor must not raise "very dangerous" expectations of Berlin helping to bail out foreign banks. In a pivotal move that is likely to clear the way for the European Central Bank to take oversight of the euro area's biggest financial institutions from national supervisors, Wolfgang Schäuble, the German finance minister, said he was willing to compromise on some of his longstanding objections to the scheme. But Mr Schäuble told an emergency meeting of finance ministers that one of the key purposes of the reform - allowing common resources in the eurozone's €500bn rescue fund to be injected directly into ailing banks - is out of the question until well into 2014. "We are ready to get a final decision at least before Christmas," said Mr Schäuble. But he added: "Again and again we have created expectations we cannot fulfil and that is very dangerous. We should be modest. Mr Schäuble's reluctance may reflect growing political pressure on the issue at home. Leaders of Germany's two main opposition parties - the Social Democrats and Greens - strongly criticised the plan on Wednesday, arguing using the eurozone rescue fund to help struggling banks improperly saddled German taxpayers with an "implicit guarantee" for foreign banks. Peer Steinbrück, former finance minister and the prospective SPD challenger to Angela Merkel in next year's general election, called for a €200bn fund financed by the banking sector to be set up, in place of using the resources of the European Stability Mechanism, the eurozone's rescue fund. The supervision plan is the first - and probably the easiest - step towards a eurozone banking union designed to shore up confidence, resuscitate cross-border bank lending and bring down painfully high borrowing costs for peripheral banks. Berlin's more flexible approach is likely to break months of diplomatic deadlock on centralising supervision at the ECB and enable leaders to clear a self-imposed year-end deadline to agree parameters for its functioning. But Germany's reluctance to fastrack implementation is likely to deliver the benefits of commonly-backed bank rescues too late for countries currently under the microscope, including Ireland, which must return to the financial markets when its bailout programme ends in November 2013. France and Germany have been at odds over fundamental principles of the reform plan, including the division of labour and power between the ECB and national supervisors and the decision making rules within the ECB. But a compromise on some of these areas became clear early on Wednesday night, where banks holding less than €30bn assets would be primarily overseen by national authorities. While the ECB would retain powers to intervene, Berlin remained wary of giving the ECB intrusive and unconditional authority to step in and hand instructions to smaller banks - a key French demand. The bulk of France's banking system is made up of large financial institutions; Germany's is comprised of small banks. Mr Schäuble was not alone in his desire to delay the date a new ECB-led supervisor is up and running. Jeroen Dijsselbloem, the Dutch finance minister, raised the possibility that he may not be ready to cede control to the new supervisor even by April 2014, arguing that eurozone leaders should be given wiggle room to delay even further. "We have to deal with the possibility that the ECB will say: We are still building up our organisation and we are not ready to take up these responsibilities," Mr Dijsselbloem said. If we have to pass our financial sector, our four big banks, onto the ECB without assurances the ECB is ready, that is a risk. Other EU officials are expected to maintain pressure on Germany to keep to a faster timeline. In a draft communiqué circulated to national governments on Wednesday night, and obtained by the FT, Herman Van Rompuy, the European Council president, suggests the eurozone come up with an "operational framework" for using money from the ESM to rescue weak banks by March 2013, something objected to by both German and Dutch officials. Additional reporting by Quentin Peel in Berlin