Sharp differences over how a vaunted 'Banking Union' would close failing banks before they seriously damage the underlying economy surfaced at an EU finance ministers meeting Friday.
Embraced initially as essential to head off future crises, several member states, including Germany and non-euro Britain, are now reluctant to give up their right to supervise their own banks.
The sticking point is a proposed Single Resolution Mechanism to work with the Single Supervisory Mechanism approved Thursday by the European Parliament.
A deposit guarantee system to reassure depositors their money is safe would then complete the Banking Union, aimed at preventing a repeat of the taxpayer having to rescue failed lenders at huge cost.
EU Financial Markets Commissioner Michel Barnier said there had been "a challenging debate" between the bloc's 28 finance ministers over the resolution mechanism, especially its legal basis.
The current plan is that it could legally operate under the European Commission, the EU's executive arm.
"The Commission is not looking for an additional role, it is necessary only that the system works," Barnier said, stressing that "just having national regulators is not enough" to tackle the problem.
Barnier noted that German Finance Minister Wolfgang Schaeuble believed the resolution mechanism required treaty change.
But whatever the case, Barnier underlined the need to put something in place quickly.
"If someone has a different proposal which would work just as well, we would look at it very carefully," he said.
Schaeuble said that Berlin wanted an "efficient mechanism as soon as possible" within current treaty provisions.
"And if we want to have an even more efficient mechanism, we have to agree as soon as possible on a limited treaty change," he added.
Any treaty change, however, is likely to be fraught, with old wounds reopened.
British Prime Minister David Cameron has said he would use any review of the treaty as a chance to repatriate powers from Brussels.
And Britain has been reluctant to go along with Banking Union given London's status as one of the world's largest financial hubs and home to many of the globe's biggest banks.
Earlier Friday, the 17 eurozone finance ministers warned against complacency as the economy recovers from a record recession, insisting that the return to growth should not mean an end to reform.
The bailed-out countries especially must stick to their targets, with no compromise, even though it is expected some such as Greece need further help.
"The economic outlook is improving," Jeroen Dijsselbloem, head of the Eurogroup of finance ministers, told a press conference, but added that unemployment stuck at 12 percent "is still too high."
"We need to carry on with all our policies with strong resolve," he said, citing reforms which now allow Brussels to vet national budgets before approval to ensure they meet EU rules on the deficit and debt.
Dijsselbloem said the Eurogroup would hold an additional meeting on November 22 to review the draft budgets and the overall situation in the bloc.
Nearly all member states have breached the deficit and debt rules by a wide margin, made worse by the costs of bailing out failed banks.
France in particular has struggled for growth and EU Economics Affairs Olli Rehn called on Paris to push through more reforms and tackle high labour costs in particular.
French Finance Minister Pierre Moscovici insisted the government was doing just that and was at the forefront of recovery with growth of 0.5 percent in the second quarter.
On Cyprus, the eurozone ministers approved payment of its next 1.5 billion euros aid tranche under a controversial bailout which roped in large depositors in the wind up of one of the island's biggest banks.
Dijsselbloem made no specific comment on Greece -- twice bailed-out and now expected to need a third wave of help -- saying the November meeting would review the situation in all EU states.
Portugal has run into serious problems after key parts of its rescue were ruled illegal, but Dijsselbloem said he prefered it stick to agreed targets, especially for the public deficit which Lisbon wanted to ease next year.
Slovenia was meanwhile making progress in winding down problem lenders, he said, amid speculation the country also might need a rescue.
Slovenian Finance Minister Uros Cufer said the government needed no help.
"Our accounts are full so I think we are very well positioned to do it ourselves," Cufer said.