Eurozone chief says banks in 'much better place'

Eurogroup chief Jeroen Dijsselbloem said Thursday that the EU's single currency area and its banks were stronger than a few years ago, playing down concerns that have spooked global markets.

"I believe that in the eurozone, structurally, we are in a much better place than we were a few years ago. That also goes for our banks," Dijsselbloem said as he entered a meeting of finance ministers from the 19 countries that use the euro.

"The process of continuing to strengthen the banks will go on with banking union in place... the markets need to adjust to that, maybe that's part of the issue at the moment," the Dutch finance minister added.

"I think the process of banking union and making it stronger is key and that's what we are going to do in the coming months."

European bank stocks were the catalyst for bruising declines in US and European equity markets earlier this week amid fears of another banking crisis and a global recession.

But they rebounded on Wednesday following unconfirmed reports that embattled Deutsche Bank may launch a bond buyback to assuage concerns about its financial strength, before plunging again on Thursday.

Dijssebloem said when asked about Deutsche Bank that "I don't have an opinion on individual banks."

The eurozone has been trying to bring in a form of "banking union" to match its single currency for years in a bid to avoid a repeat of the global financial crisis and eurozone debt crisis.

But there are growing concerns that the drawn out process has left Europe still without an effective backstop mechanism in case things go south again.

Italy's banking sector has also been causing concerns, with ongoing worries over consolidation and last month's European Union proposal to create a "bad bank" vehicle to help Italian lenders sell their bad loans.

- 'Bit of exaggeration' -

The eurozone finance ministers did their best to play down talk of fresh problems that could cause contagion on the global markets.

"On the whole, we see that the European banking system is much more solid than in the past," EU economic affairs commissioner Pierre Moscovici said.

Germany's powerful finance minister Wolfgang Schaeuble refused to comment directly on Deutsche Bank but joined the chorus of calm on the wider situation.

"There is a bit of exaggeration on the part of the markets," he said.

Finland's finance minister and former prime minister Alexander Stubb meanwhile said the the banking situation "doesn't worry me at this particular moment".

Two of the other problems that face the eurozone -- Greece and Portugal -- were also being played down by the ministers.

Asked about reports that negotiations over controversial pension reforms required under Greece's bailout programme had derailed, Dijsselbloem said he was "absolutely convinced that that's wrong."

"So I am optimistic that we will find that ground," Dijsselbloem said.

Greece must save 1.8 billion euros from state spending on pensions under a three-year bailout signed with the European Commission, the European Central Bank and the International Monetary Fund in July.

Athens hopes to conclude a review by its creditors by early April so it can proceed with talks on renegotiating its enormous public debt -- nearly 200 percent of gross domestic product (GDP).

Portugal meanwhile "needs to stand ready if necessary" to abide by eurozone budgetary rules, the Eurogroup chief said, days after Brussels approved Lisbon's budget with reservations.

- Investors dump Greek, Portuguese bonds -

Portugal's new socialist-led government said on Friday it had cut its budget deficit target for 2016 to 2.2 percent of GDP from a previously announced target of 2.6 percent.

"It's not a unique situation, we've had it with other countries, we will visit it later in the year," Dijsselbloem said.

But financial market investors were skeptical.

Government bond prices fell sharply across the eurozone's southern flank on Thursday, pushing yields higher, as investors demanded higher returns given the Greek and Portuguese risks.

Yields on 10-year Greek government bonds rose to 11.4 percent on Thursday from 10.9 percent the previous day, and Portuguese yields tightened to 4.0 percent from 3.7.

Meanwhile German 10-year bonds, considered to be the eurozone's safest investment in times of crisis, were in strong demand, with yields going down to 0.19 percent from 0.24 a day before.