Germany wants to reopen talks with Switzerland on a deal to stop its citizens dodging taxes after opposition parties said it was too soft on tax evaders and threatened to block it, sources said.
Berne said on Thursday it was ready to continue talking but did not want to change the core of the deal.
It's worth going back to the Swiss partners to get a feel, as quickly as possible, whether further compromises may be possible on some points, one government source told Reuters after a meeting in Berlin late on Wednesday.
A deal could net Germany billions of euros in tax money currently stashed by German citizens in secret accounts in Switzerland and would whittle away at Switzerland's cherished but under-fire banking secrecy.
German Finance Minister Wolfgang Schaeuble, who has signed a deal with Berne but not yet presented it to parliament for ratification, met with finance ministers of the federal states led by the Social Democrats (SPD) and Greens to persuade them to back the deal.
Those states have threatened to veto the deal in the upper house, or Bundesrat, arguing it is too lenient on tax evaders and are pushing for amendments that would require further concessions from Switzerland.
The current draft preserves most client confidentiality and taxes only future investment income and capital gains at 26.375 percent.
SPD and Green states want the tax rate made comparable with German levels at 35 percent.
It will certainly not be easy to get an agreement and it is still true that we would rather have no agreement than a bad agreement, Nils Schmid, finance minister in the rich southern-German state of Baden Wuerttemberg, told Reuters.
However, Schmid added that states led by the SPD and Greens were open to a deal.
We have promised to outline our sticking points, not in a way that sets it up to fail, but so there is a chance of agreement, he added.
The centre-left SPD, which hopes to take back the chancellery next year, will seek to extract as much political capital as possible from a deal that many perceive to favour the rich and also criminals. Some 86,500 people have already signed a petition against the deal, according to lobby group Campact.
DEAL IN EVERYONE'S INTEREST
In principle, striking a deal with Switzerland is in the interests of the federal states as well as Berlin's government, the participants at Wednesday's meeting agreed, according to sources.
A deal would give them the chance to claw back cash at a time when some states' budgets are under heavy pressure, and also avoids the tricky process of hunting down tax dodgers.
In order to become law, a deal would have to pass both houses of the German parliament, including the Bundesrat upper house where the states are represented and where Chancellor Angela Merkel's coalition does not hold a majority.
Switzerland said it was willing to talk further.
If Germany wants to continue the ongoing talks on the ratification of the signed agreement, we are ready to do so. However, we do not want to touch the core content of the agreement, said Mario Tuor, a spokesman for the office that handles tax disputes.
Switzerland hopes a deal with Germany - and a similar one with Britain - could become a model for agreements with other EU states such as Greece, which want to ensure their nationals are not able to escape taxes, particularly in times of austerity.
(Reporting by Gernot Heller, additional reporting by Oliver Hirt; Writing by Annika Breidthardt; Editing by Noah Barkin and Ben Harding)