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Politicians Fret as IKB Gets More Taxpayer Cash

Stricken German lender IKB got another $700 million of taxpayers' cash to bolster itself amid more subprime writedowns, exasperating politicians who said it should get no more state help.

Unable to sell billions of euros of risky financial assets given market jitters, IKB said on Thursday it would get 450 million euros ($707 million) in fresh loans from its state owners to offset mounting losses on investments.

Financial sources close to the situation said the aborted asset auction -- which one said drew "rock-bottom prices for this toxic waste" -- could disrupt Berlin's plans to sell IKB.

State development bank KFW, which holds the government's 43 percent stake, opened IKB's books to interested bidders earlier this week.

Once a little-known lender to medium-sized companies, IKB shot to fame last year as Germany's first subprime casualty when its investments in the market for risky U.S. mortgages soured.

The affair has become an embarrassment for Germany as a banking centre, and the government has promised to do all it could to save the bank from collapse.

KFW has led three rescue packages worth more than 8 billion euros, with the cash injection unveiled on Thursday practically using up the funds agreed in the most recent bail-out.

Politicians expressed anger over the spiralling cost of propping up the bank.

"There must be no further money from the federal budget," Steffen Kampeter, budget policy spokesman for Chancellor Angela Merkel's conservative Christian Democrats (CDU), told Reuters.

"Northern Rock must not become a blueprint for IKB," he added, referring to the Britain's fifth-largest mortgage lender that was nationalised last month to prevent its collapse.

Juergen Koppelin, a finance expert for the opposition Free Democrats, called the IKB saga a "never ending story" and said Finance Minister Peer Steinbrueck's hopes of getting 800 million euros for IKB appeared increasingly unrealistic.

"Steinbrueck has got to say what additional risks IKB is facing and take steps to ensure that there is no further burden on the budget," he said.

Cash Call

IKB's shares, which have lost 85 percent in a year, slid as much as 13 percent on the news and were down 3 percent at 4.91 euros at 1424 GMT.

IKB said it expected to write down 450 million euros on a 3 billion euro portfolio of assets with a high probability of default, on which it has already written off 630 million euros.

It expected another 140 million euros of losses on a separate, 2.8 billion euro portfolio of assets with a lower risk profile for which it had already written down 320 million euros.

The new markdowns mean IKB will post a group net loss of around 800 million euros in its 2007/08 financial year according to IFRS accounting standards, it said.

In February it had forecast a loss of around 550 million euros.

"For the next financial years, IKB will not post any or very low profits for the group," it said.

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