UPDATE 2-Deal reached on ESM reform but debt restructuring clauses to be clarified -Centeno

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BRUSSELS, Dec 5 (Reuters) – Euro zone finance ministers have reached an agreement “in principle” on the reform of the bloc’s European Stability Mechanism rescue fund in a meeting in Brussels, the chair of the meeting, Mario Centeno said on Thursday.

“We have reached an agreement in principle on a package of elements related to the ESM reform, and we laid the ground for upcoming decisions to complete the banking union, including the common deposit insurance,” Centeno told a news conference.

He added, however, that some “loose ends of a legal nature” still needed to be clarified.

That could happen at the next meeting of euro zone finance ministers in January, he said, adding that the reform would then be signed off in the first quarter of next year.

He said among the issues that needed to be addressed in January were clauses on the restructuring process for public debt in bailed-out countries.

These clauses, known as single limb collective action clauses, can facilitate the restructuring of debt when needed in exceptional circumstances, but Italy has raised concerns that they could increase yields on its high debt. (Reporting by Francesco Guarascio @fraguarascio and Jan Strupczewski; Editing by Hugh Lawson)

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