EU finance ministers met in Brussels today to discuss the latest proposals for a Europe-wide banking union, widely seen as necessary to prevent a repeat of the eurozone debt crisis.

Eurozone governments have set a target of 1 January 2013 to have the architecture of a new EU-wide bank supervision scheme in place.

However, deep divisions remain over how it will work and how it will affect non-eurozone countries.

The setting up of a banking union will be key if Ireland is to secure a deal on legacy bank debt.

Analysis of the causes and prognosis of the eurozone economic crisis concludes that Europe needs a single banking union.

It is seen as necessary to prevent reckless bank lending from degrading the credit worthiness of sovereign countries, who, in turn, have ended up using taxpayers' money to bail out the banks.

The elements include a single bank supervisor, an agency to wind up stricken banks so that taxpayers do not bear the burden, and a Europe-wide deposit guarantee scheme.

Ireland has a key interest in the first element.

Under plans set out by heads of government earlier this year, the permanent EU bailout fund, or European Stability Mechanism, can only begin to recapitalise banks directly once a Europe-wide bank supervision system is in place.

That could mean the ESM taking an equity stake in the so-called pillar banks in Ireland - Bank of Ireland, AIB and Permanent TSB.

But most observers conclude that the supervision scheme, run by the European Central Bank, is unlikely to happen for months, and probably not until after the German elections in September.