* UK's Osborne urges EU to adopt Liikanen ring-fenceproposals * UK already planning to separate retail and investmentbanking * Germany and France sceptical about ring-fence proposals By David Milliken LONDON, Jan 8 (Reuters) - British finance minister GeorgeOsborne urged European Union policymakers in Berlin on Tuesdayto follow his example and toughen bank regulation across the27-member bloc. As one of the countries worst hit by the 2007-08 financialcrisis - and with relatively hands-off existing regulation -Britain is passing a new law to separate banks' day-to-dayretail banking arms from riskier investment bank activities. The European Commission - which proposes EU legislation - isconsidering similar proposals from Finnish central banker ErkkiLiikanen, but Germany and France, the bloc's two largesteconomies, have opposed similar ideas in the past. Osborne urged a rethink at a gathering of German businessleaders and senior euro zone politicians in Berlin. "There is an interesting proposal on the table ... whichenvisages ring-fencing European banks' retail and investmentarms into separate entities," Osborne told the meeting, whichincluded German Chancellor Angela Merkel. "Britain is already pushing ahead with similar reforms and Ithink it's an idea that the EU, including Germany, should giveserious consideration to implementing," Osborne added, accordingto a statement provided by his office. Britain often has a strained relationship with the EU,especially over financial regulation, and is keen to maintain ahigh degree of national control while the 17 EU members that usethe euro press on with plans for a single bank supervisor. The law going through Britain's parliament, and Liikanen'sproposal for the EU, do not go as far as similar U.S. plans, andstop short of fully breaking up banks such as Britain's Barclays or Germany's Deutsche Bank which havesignificant investment and retail operations. But they aim to shield taxpayers from having to fund furtherbailouts and to protect savers from any more banking collapses after more than five years of crisis. Liikanen's report argued in October for a "legal separationof ... particularly risky financial activities from deposittaking", including banks' trading on their own behalf as well as"activities closely linked with securities and derivatives". The European Commission intends to decide by the middle ofthe year whether to go ahead with the plans. During his trip to Berlin, Osborne also met his Germancounterpart Wolfgang Schaeuble. Osborne and Schaeuble's officesdeclined to comment on their discussion. Ring-fencing banks is opposed by Schaeuble's ChristianDemocrats, but backed by Germany's main opposition party, theleft-wing Social Democrats.