Eurozone finance ministers push for deal on banks' toxic assets

Special Report:Global Financial Crisis

BRUSSELS, Feb. 9 (Chinese media) -- Euro zone finance

ministers on Monday weighed several ways to tackle the toxic assets of banks in

an effort to reactive the flow of credit amidst the global economic crisis.

"We discussed at length all the technical implications of trying to deal with this question of toxic assets," Luxembourg's Prime Minister and Finance Minister Jean-Claude Juncker told a news conference after a regular meeting of finance ministers from the 16-nation euro zone, known as the Eurogroup.

European Central Bank President Jean-Claude Trichet (L), European Commission President Jose Manuel Barroso (C) and European Monetary Affairs Commissioner Joaquin Almunia attend an Eurozone finance ministers meeting in Brussels February 9, 2009.(Chinese media/Reuters Photo)
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"For some banks it is absolutely vital that we find

some way of dealing with ... toxic assets," said Juncker, who also chairs the

monthly gathering.

With the banks' balance sheet still troubled by toxic

assets, which soured due to potential losses from debt based on bad loans,

confidence in the banking sector remains fragile.

Lending remains frozen also despite national efforts

to pump billions of euros into the financial system.

Possible solutions suggested so far is to set up a

"bad bank" to buy up bad assets or to provide government guarantee to cover

massive potential losses from those assets.

European Commissioner for Economic and Monetary

Affairs Joaquin Almunia said he wants all 27 European Union (EU) finance

ministers, who were to meet Tuesday, to reach an agreement on how to handle bad

assets.

Almunia indicated it would be up to each EU member

state to decide specific ways of dealing with toxic assets, but any such plan

should respect EU competition rules.

"We need to guarantee a level playing field ... and

we need to guarantee respect of state aid rules even in this time of crisis," he

said at the press conference with Juncker. "This does not mean that all

solutions, all the mechanisms should be the same."

Juncker said EU member states would probably choose

"a range of tools" that would allow each country to pick the best option for its

banking sector.

At the same time Juncker warned that EU governments

should be "very aware of the fact that the way we deal with this could have a

very serious impact on public finances."

Earlier Monday, Almunia wrote in the Wall Street

Journal that agreeing on how to deal with toxic assets would minimize potential

cost for taxpayers and avoid distortion of competition.

"The fiscal stimulus measures announced by countries

worldwide, including in the EU, should enable us to stem the tide of bad news

and create the conditions for a gradual recovery in the second half of 2009," he

wrote.

"But for this to happen, the immediate and most

urgent priority is to break the spiral of a deteriorating economic outlook

creating feedback effects on financial activity and back again onto the real

economy," he added.