"I am optimistic that over the next six months we will manage to get a result," Birgitte Zypries told reporters on the eve of two-day justice and interior ministers talks in the eastern city of Dresden.
Zypries and German Interior Minister Wolfgang Schaeuble, who are hosting the meeting, have put the issue on the agenda of the two-day talks and of Germany's six-month EU presidency.
She urged EU nations to agree on new common rules to combat racism and xenophobia within the EU as soon as possible, including the introduction of minimum EU-wide jail terms, which she said should be between one and three years, against those who purposely incite racist violence or hatred, or those who deny the genocide of Jews during World War II.
Ethnic and cultural tensions
Efforts two years ago to set minimum jail terms ended in failure, however, after ministers were unable to agree. Several countries, notably Britain, Italy and Denmark, see such tough measures as overstepping the rights of expression under their national laws.
EU nations have been at pains to agree on common rules to combat racism and xenophobia in recent years, amid heightened ethnic and cultural tensions across Europe. EU Justice and Home Affairs Commissioner Franco Frattini said, however, that a compromise could be reached to ensure that personal freedoms were not encroached upon.
"While preserving freedom of expression, I think we have to criminalize concrete incitement," Frattini said. He added that the German proposal, which will be presented in the months to come, would leave it up to member states to decide what racist incidents constituted a punishable crime.
"It means the lengths of terms of prison are to be decided at state level," Frattini said.
Many EU nations already ban denials of the Holocaust including Germany, France, Spain, Austria and Belgium.
Austria last year jailed British writer David Irving for more than a year after he questioned the Holocaust in a book published there.