French Finance Minister Pierre Moscovici (centre) talks with Swedish Finance Minister Anders Borg (left) and British Chancellor of the Exchequer George Osborne, during the EU finance ministers meeting, at the European Council building in Brussels. Osborne is said to be particularly important in current circumstances. (Photo: AP)

BRUSSELS, Belgium – European Union finance ministers are seeking ways to cut down on tax evasion and hammer out controversial building blocks of the region’s planned banking union to stabilize its financial system.

British Chancellor George Osborne insisted Tuesday cracking down on tax evasion was important in the current economically difficult times.

“I think that at an economic time like this, it is right that everyone makes their fair contribution,” Osborne said on his way into a meeting of the 27 EU ministers in Brussels. “This is our opportunity to do that.”

Part of the effort will involve reviving a long-stuck savings directive, which seeks to set up an automatic exchange of banking information between countries so that interest income on various types of savings accounts can be properly taxed.

The directive requires unanimous approval from all 27 EU members. However, Austria and Luxembourg, two states renowned for their cultures of banking secrecy, have long held up the regulation. But increasing international pressure from the US and their European peers has swayed them into reconsidering their stance.

Britain, however, could also face tricky questions, as many EU officials say it is not doing enough to crack down on tax evasion in its offshore territories.

In addition, Irish Finance Minister Michael Noonan said he expected the ministers also to direct the European Commission, the EU’s executive branch, to begin negotiations on the exchange of banking information with five small countries that aren’t EU members — Switzerland, Andorra, San Marino, Monaco and Lichtenstein.

Noonan presided over the meeting because Ireland currently holds the EU’s six-month rotating presidency.

The ministers will also continue their effort to construct a banking union, a key part of the region’s efforts to strengthen its financial industry and avoid a repeat of the financial crisis. The meeting will focus on banking resolution — what happens when a bank fails — and the key question of who will lose money when a lender is wound up.

The ministers were expected to discuss the hierarchy of who would have to take losses — or be involved in a “bail-in”. At the moment, ministers are agreed that a bank’s capital must take the first hit, but then the pecking order becomes less clear with junior and senior bond holders, shareholders, and ultimately all the banks’ clients, in danger of taking a hit.

Noonan said holders of deposits of over 100,000 euros — the EU’s deposit insurance ceiling — could stand to lose, but they would be last in line and there would be some exceptions. Ministers also sought to reach agreement on whether those rules should come in force as planned in 2018, or three years earlier as some demand.

The discussion comes on the backdrop of the messy (euro) 10 billion bailout for Cyprus, during which a precedent was set in forcing holders of bank deposits to take losses. The European Central Bank and EU officials have since called for the establishment of clear rules for bank bail-ins so that investors can gauge their risk beforehand.

Dutch Finance Minister Jeroen Dijsselbloem said reaching agreement would take time.

“I’m sure we won’t finalize it today — that would be hoping too much,” Dijsselbloem said. “But we certainly hope to make some progress.”

The ECB, for one, left no doubt that it will push hard for a swift agreement on all elements of the bloc’s banking union, including a central authority with the power to rescue or unwind ailing banks that would accompany the ECB’s centralised oversight of the bloc’s banks.

“We want to make progress on all elements of the banking union in parallel,” insisted ECB executive board member Joerg Asmussen, adding this should be achieved “hopefully by the summer of next year.”

The establishment of the banking union will get credit flowing again to some of the 17-nation eurozone’s troubled nations, thereby helping to “kickstart growth and employment,” he said.

And ministers will also try to reach agreement on an amended budget for the current year, a precursor to reaching agreement on the EU’s long-term (euro) 1 trillion budget, ranging from 2014 through 2020.

For 2013 the Commission says there is a shortfall of about (euro) 11 billion in its (euro) 130 billion budget, resulting mainly from unpaid bills from last year. The ministers, however, were set to propose an additional amending budget to cover about (euro) 7 billion and then offer a political guarantee to cover further shortfalls if necessary.