The Swiss government is to talk to the U.S. authorities in a bid to resolve a legal impasse that has threatened to derail a key tax deal over UBS client data, it said on Wednesday.

A UBS client last week won a Swiss court appeal to prevent her account data from being given to the U.S. taxman, throwing doubt on Switzerland's ability to deliver details of 4,450 UBS client accounts to U.S. authorities as agreed in August.

The cabinet is convinced that it can definitively overcome the continuing legal and sovereignty conflict with the United States with all its damaging consequences for Switzerland's economy and as a financial center, the government said.

UBS shares, which have fallen steeply since the court ruling, reversed losses after the announcement to trade up 0.3 percent at 14.54 Swiss francs at 1318 GMT, compared with a 1.2 percent weaker DJ Stoxx European banking index <.SX7P>.

The Swiss government said in a statement after a cabinet meeting a possible step could be to seek retroactive approval for the UBS deal from the Swiss parliament.

(Reporting by Jason Rhodes, writing by Emma Thomasson)