* Panel chairman says sanctions proposal finished
* Foresees changes passing without national referendums
By Brian Rohan
BERLIN, Oct 29 (Reuters) - An accord to amend the European Union's main treaty is a step forward for Germany, even though EU leaders killed off Berlin's proposal to punish rule breakers, a leading German parliamentarian said on Friday.
Gunther Krichbaum, chairman of parliament's European Union Affairs Committee, told Reuters the agreement reached on Thursday in Brussels meant progress for Europe's defences against new financial crises.
"It is a great step forward because we now have a crisis mechanism so that in the future we will not have to deal with problems like the Greek crisis on an ad hoc basis," he said.
EU leaders agreed to set up a permanent system to handle sovereign debt problems such as those faced by Greece and endorsed tougher budget rules including sanctions against states that do not keep deficits and debt in check.
Germany failed to win widespread support for demands to suspend the voting rights of member states that break the rules, a plan Krichbaum said had no future.
"It was painful ... and I am convinced it will not be possible to implement it in the future either," he said, adding that he saw the compromise as an overwhelming success.
Changes to the treaty will be agreed by mid-2013 and are part of Europe's efforts to ensure it can cope with any repetition of the Greek debt crisis this year which threatened the future of the euro.
Germany, Europe's biggest economy, says a permanent system must replace the ad-hoc 440-billion-euro safety net created in May for all euro zone states. It says it should be partly funded by the private sector and entail strict conditions.
Krichbaum said he was confident the treaty changes could be passed without difficulty as the proposals would be limited in scope and thus countries such as Ireland would not have to hold a referendum on the issue, smoothing the ratification process.
"Brussels is not increasing its power, so that means national referendums are not needed... I think it will pass in all member countries."