10 February,2009 07:37 AM IST | | AP
France and Germany called on the European Union today to tackle toxic assets on banks' balance sheets that have caused lending in the economy to freeze and worsened the recession.
French President Nicolas Sarkozy and German Chancellor Angela Merkel said restoring credit to the economy should be the top priority for the 27 EU nations.
"Problematic assets would be an essential factor that would contribute to restoring confidence in the banking sector," they said in a joint letter to the European Commission and the Czech prime minister, whose country holds the rotating EU presidency.
They stressed that each government should be free to tackle toxic assets in their own way--but that the EU needed to fix general guidelines to avoid one nation's actions harming business elsewhere in Europe's single market.
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EU finance ministers meet today and tomorrow to discuss what they should do about the billions of euros in securities that have dropped in value and punched huge holes in banks' balance sheets.
The EU's top economy official, Joaquin Almunia, suggested that governments could either create 'bad banks' to buy up these assets or set up an insurance program to guarantee them--as Britain is planning.
