Europe’s banking union plans are in danger of unravelling amid a protracted political stand-off over the system for shutting failing banks.

Germany is largely holding out against fierce pressure from the European parliament to streamline decision-making in the common bank resolution regime and strengthen its funding.

Working within tight limits laid down by Berlin, EU finance ministers on Tuesday agreed on fresh concessions to offer MEPs and break an impasse that threatens to delay a flagship eurozone crisis reform by a year or more.

But senior officials involved in the talks expressed deep scepticism that it would be enough to bridge the significant gap with a parliament that is showing little appetite for abandoning its key demands.

Michel Barnier, the EU commissioner responsible for the reforms, said some progress had been made but warned that the views of the parliament and EU member states “remain very divergent”.

Looming elections leave just a few weeks to reach a compromise and pass the law through the parliament before it breaks at the end of April. Mario Draghi, the European Central Bank president, has warned that failure to pass the reforms would undermine Europe’s nascent banking union and seriously hurt confidence.

Some diplomats are privately concerned that Wolfgang Schäuble, the German finance minister, would rather delay the reforms than yield significant ground. “The European parliament has to make a lot of move, otherwise we will not get a decision,” Mr Schäuble said during the debate on Tuesday. “And then we will have no regulation.”

After two days of talks, finance minister agreed a series of revisions to a hard-fought deal between member states that was agreed in December.

This included reducing some of the complexity in the decision-making process by limiting the role of EU finance ministers to rejecting or accepting the recommendations of an independent resolution board, rather than revising them.

However this still falls short of parliament’s wish that the European Commission approve final resolution decisions, so that member states are kept at arm’s length from the process.

Although the details remain unclear, the ministers are also showing themselves open to accelerating the build-up of the €55bn common resolution fund, so it is fully resourced and mutualised over eight years, two years earlier than first envisaged. The gradual pooling of resources may also be front-loaded.

However no progress was made on agreeing a joint guarantee that would enable the fund to borrow money in the transition period when it is still building up its resources through a levy on banks. Loans would instead be raised against expected fee payments from banks.

The parliament, by contrast, is pushing for the fund to be fully mutualised from the start and for it to be offered a state-backed credit line to ensure a stable source of funding.

A deal had been pencilled in for this week; Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup, and Giannis Stournaras, the Greek finance minister, are leading talks with the parliament on Tuesday in the hope of a breakthrough.

Finance ministers did not decide what to do if – as many officials expect – no agreement is possible. Diplomats say an emergency meeting next week is possible, ahead of a summit of EU leaders.

Sharon Bowles, the chair of the parliamentary committee negotiating the legislation, said the parliament “is not going to roll over for just a few tweaks but there are possibilities for moving closer”.

“The view is still that getting it right is better than speed and none is better than wrong,” she added.

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