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European Union finance ministers to discuss Europe’s bad-loan problem

European Union finance ministers will try on Friday to find a way to deal with bad loans at European banks that drain their profits and capital and obstruct their financing of the economy.

The 2008 financial crisis and subsequent economic downturn in Europe increased the non-performing loans (NPLs) of EU banks, which now amount to 1 trillion euros (0.86 trillion pounds), or 5.4 per cent of all bank loans.

The data come from a paper prepared for the ministers’ discussions on Friday and Saturday at informal talks to be held in Valletta by the Maltese presidency of the EU.

The paper said it is difficult to compare levels of bad loans in banks elsewhere because no common definition exists, but they amounted to 1.7 per cent of total loans in the United States and 1.6 per cent in Japan in 2015.

“The pace of working out the NPLs is still relatively slow, and if action continues at that level it will take quite a bit of time,” one EU official said.

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