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Joint EU action planned to bolster banks

The EU executive is proposing, "coordinated action" by the 27 European Union states to recapitalise banks, with efforts already underway, European Commission head Jose Manuel Barroso said on Thursday.

india Updated: Oct 06, 2011 20:14 IST

The EU executive is proposing, "coordinated action" by the 27 European Union states to recapitalise banks, with efforts already underway, European Commission head Jose Manuel Barroso said on Thursday.

"We are now proposing to the member states to have a coordinated action to recapitalise banks and get rid of toxic assets they may have," Barroso said in an interview with Euronews TV.

"We are determined to do everything necessary to ensure that Europe's banks are able to play their essential role," the Commission president said later in a separate statement.

"Recapitalisation efforts are well underway, additional efforts may be needed. Coordination at European level is of course essential," he said at a short news conference held with visiting Finnish Prime Minister Jyrki Katainen.

The European Commission, which runs day-to-day EU business, was monitoring the situation on a daily basis in collaboration with the European Banking Authority and national supervisors, Barroso said.

He admitted, "the situation in the market has changed" since the summer when only nine of scores of European banks failed stress tests. Another 16 just scraped through.

But he did not answer questions on the proposed elimination of toxic assets and refused comment on the IMF's suggestion that 100 to 200 billion euros are needed to recapitalise stretched banks.

The comments come the same week France and Belgium were forced to leap to the rescue of Dexia, the first European bank to be dragged down by the euro zone debt crisis - and which also had to be rescued in 2008.

The debt crisis that began in Greece, snaring Ireland and Portugal on the way and now threatens Italy and Spain, is putting at risk the whole euro project as banks exposed to sovereign debt find it impossible to raise funding.