UPDATE 1-Wisemen slam German government over banks - report

BERLIN, Nov 12 (Reuters) - Germany has failed to deliver the right policies to restructure its banks and should put lenders under more pressure to recapitalise, according to the government's panel of economic advisers, a newspaper said. Citing a copy of the panel's latest annual report, business daily Handelsblatt said on Thursday the group known as the five "wise men" saw "considerable failings" in the government's policy response to the financial crisis. In the report due to be published on Friday, the five found Germany needed to undertake a "rapid and lasting clean-up of bank balance sheets, as well as restructure lenders whose business model has proved unsustainable," the paper wrote. Separately, the wise men also attacked Chancellor Angela Merkel's new centre-right coalition's plans to cut taxes. Too few lenders had opted to get problem assets off balance sheets by using a bad bank facility set up by the government because participation in the scheme was voluntary and the conditions were not attractive enough, the wise men said. As a result, the five -- who include one woman -- forecast that the bad bank model was only likely to be used "to a limited degree" unless the government acted. "Those lacking sufficient equity capital should be put under more pressure to remove problem assets and recapitalise," the newspaper cited the panel as saying. "If they are unable to raise their own funds on markets, this must take place through Germany's bank rescue fund." German daily Sueddeutsche Zeitung quoted a separate part of the report in which the wise men said plans by the coalition that took office last month to enact some 24 billion euros worth of tax cuts were "not convincing in any way." With public budgets already stretched by the economic crisis, proposing tax relief without having clearly outlined how this would be financed was "not compatible with any kind of serious financial policy," the panel said. (Reporting by Dave Graham; Editing by Andrea Ricci) Keywords: GERMANY WISEMEN/BANKS ([e-mail]; Reuters Messaging: [e-mail]; 49 30 2888 5217) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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