Page last updated at 17:11 GMT, Tuesday, 21 April 2009 18:11 UK

Germany 'close to bank debt plan'

German Chancellor Angela Merkel
Ms Merkel faces a general election later this year

Germany is moving closer to a solution for dealing with its banks' toxic assets, senior ministers have said, with firm plans expected by the summer.

A top-level meeting led by Chancellor Angela Merkel had made a "big step forward" said economy minister Karl-Theodor zu Guttenburg.

The billions of euros of toxic assets are hindering banks' lending activity - aggravating the country's recession.

Germany's government wants to help banks while limiting cost to taxpayers.

Reports suggest it will propose that each lender puts its toxic debts into its own "bad bank".

This would be an alternative to a new single, government-controlled bad bank.


Senior officials agreed to finalise a draft law in the next few weeks before being put to the cabinet and approved by parliament in the summer.

"There is a broad consensus among the group that we should work quickly to get a law in place during the current legislative period," said the country's finance minister Peer Steinbrueck.

Mr Steinbrueck has so far differentiated between the banks' toxic debt, and "illiquid" assets, which - while considered financially sound - are impossible to sell in the current financial market.

He said recently that the banks and their shareholders must take responsibility for the toxic debt, while the government would guarantee the illiquid assets.

Commentators say that with the German government facing a general election in five months, it was sensitive to public resistance about the government helping the country's banks write-off their bad debts.

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