Eurogroup chief Jeroen Dijsselbloem on Thursday played down fears of a new banking crisis that have spooked global markets, insisting that eurozone banks are stronger than a few years ago.
Dijsselbloem added that bailed-out Greece and Portugal, whose progress is also being nervously watched by the markets, were working on their problems but had to take further action.
His comments came after European bank stocks were the catalyst for bruising declines in US and European equity markets this week, amid fears of another banking crisis and a global recession.
"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 at a meeting of finance ministers from the 19 countries that use the euro.
Dijsselbloem, the Dutch finance minister, insisted that the EU would push on with controversial rules on how to deal with failing banks as part of its "banking union" plan.
Concerns over a "bail-in" element of the plan which could see creditors suffer to protect taxpayers when banks need rescuing have contributed to the sell-off in banking stocks.
"Let me be quite clear, markets and investors can deal with (the effects of) bail-in rules," Dijsselbloem told a press conference after the meeting.
"The implementation of everything in banking union is now crucial, and if there are legacy issues in some banks I think they should be dealt with, and that's good," he said.
European bank stocks 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.
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.
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.
- Greece, Portugal worries -
Eurozone officials meeting on Thursday also did their best to play down talk of fresh problems that could cause contagion on the global markets.
Germany's powerful finance minister Wolfgang Schaeuble said there was a "bit of exaggeration on the part of the markets."
But the single currency still confronts problems in bailed-out Greece and Portugal.
Greece and its creditors could complete the first review of the country's latest bailout by the end of March, EU economic affairs commissioner Pierre Moscovici said at the press conference with Dijsselbloem.
"We always knew it is still possible to conclude the review before Easter," he said.
The leftist Greek government is hoping to conclude the review so it can move ahead with talks on renegotiating its debt, but must first save 1.8 billion euros from state spending on pensions under the 84 billion euro ($91.6 billion) deal agreed in July.
But Dijsselbloem said that EU-IMF creditor representatives who visited Athens last week for talks with Greek officials said Athens had more to do to win approval.
"Progress has been achieved on important issues but further work is needed on number of areas," Dijsselbloem said.
As part of the bailout terms, Prime Minister Alexis Tsipras plans to reduce Greek state spending on retirement schemes, which is the highest in the 28-member European Union.
Portugal meanwhile had agreed to prepare "as of now additional measures to be implemented when needed" to abide by the eurozone's strict budgetary rules, Dijsselbloem said.
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 to meet the EU's demands.
But Germany's Schaeuble issued a stern warning.
"Portugal would be well advised ... to stop worrying the markets by allowing them to think that it is turning back on the path that it has already taken," he told reporters. "That would be very dangerous for Portugal."
Meanwhile, government bond prices fell sharply across the eurozone's southern flank Thursday, pushing yields higher, as investors demanded higher returns given the Greek and Portuguese risks.