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Italy's Monti says ESM should have possibility to aid banks

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BRUSSELS, Oct 11 (Reuters) - The euro zone's rescue fund,the European Stability Mechanism (ESM), should be rapidly giventhe possibility to recapitalise banks directly as soon as a newsystem of bank supervision is in place, Italy's Prime Ministersaid on Thursday.

"Once the single supervisory mechanism is established theESM should be rapidly given the possibility to recapitalisebanks directly," Mario Monti said in a speech at a dinner hostedby the think tank, Friends of Europe.

"This is important to separate existing and future bankingand sovereign liabilities," he said.

The European Commission has proposed that the EuropeanCentral Bank take charge of supervising banks in the euro zone,a move that is expected to open the possibility for the ESM toassist troubled banks directly rather than via their countries'governments.

(Reporting By Luke Baker and John O'Donnell; editing by RonAskew)

((john.odonnell@thomsonreuters.com)(+32 2 287 68 17 or +32 47569 15 89)(Reuters Messaging:john.odonnell.thomsonreuters.com@reuters.net))

Keywords: EU MONTI/BANKS