* Carmakers, politicians struggle to cut inner city pollution
* Compromise deal reached this week to avert bans of diesel cars
* Carmakers say retrofitting older diesel cars not a viable solution (Adds Volkswagen comment, details on stance of automakers)
BERLIN, Oct 5 (Reuters) - Germany's Environment Ministry will try to overcome resistance from carmakers to fitting older diesel cars with expensive new exhaust filtering systems as politicians and carmakers scramble to avoid outright bans on vehicles.
German carmakers and politicians were forced to hash out a compromise deal to cut pollution this week after environmental groups won a key victory in February which allowed cities to ban older diesel cars.
Carmakers are now scrambling to avert bans while seeking to avoid costly re-engineering of old cars as a way to cut nitrogen dioxide and fine particulate pollution levels in cities.
Volkswagen on Friday reiterated it would back retrofits -- as the hardware fixes are known -- and offer to shoulder 80 percent of the costs, but only on the condition that other carmakers would do the same. BMW and Peugeot have said they don't see them as a viable solution.
"That statement refers to the early reactions of BMW or the VDA (automotive industry association). That cannot be the end of it," the environment ministry spokesman said in a regular government news conference.
The issue is an urgent one.
Authorities in Berlin are looking at imposing bans on older diesel cars on 20 streets including major routes in the German capital, local broadcaster rbb said on Friday.
A ban is due to take effect in Frankfurt, Germany's financial capital, from February. The city of Hamburg this year voluntarily blocked diesel models that fail to meet the Euro-6 emissions standard from selected trunk roads.
BMW said on Tuesday it did not see hardware retrofits for diesel vehicles as a sensible way for cities to quickly meet European Union clean air rules.
The time it takes to get new exhaust filters certified for roadworthiness means retrofits take longer to implement than immediate trade-in incentives which allow clients to buy lower polluting cars, BMW said.
Carlos Tavares, the chief executive of France's PSA Group said the retrofit approach "doesn't work" because carmakers would balk at having to make a financial contribution toward rebuilding older cars.
"Who's going to pay is not clear. We believe it's not the carmakers' responsibility because at the time when those cars were sold, they met all legal requirements," Carlos Tavares told Reuters at the Paris Motor Show.
BMW said it would offer a trade-in incentive of 6,000 euros in the most polluted parts of the country. (Reporting by Michelle Martin, Maria Sheahan, Thomas Seythal and Edward Taylor Editing by Keith Weir)