The EC committed EUR 3000 billion in government aid for the financial sector

• Revised estimates to be published by the IMF may put toxic assets accumulated by banks and insurance groups at 4000 billion dollars

The European Commission yesterday estimated the maximum cost of the aid that governments have provided to the European financial sector so far could reach EUR 3000 billion, AFP says.

A large chunk of the loan, amounting to EUR 2300 billion, will go to the guarantee system, which will only be used by the authorities in the event that an insurer or bank defaults. Brussels officials have authorized recapitalizations of almost EUR 300 billion and other rescue and reorganization measures, which would cost approximately EUR 400 billion.

" The responsibility now lies with the financial sector to clean up their balance sheets and restructure to ensure a viable future", EU competition commissioner Neelie Kroes said.

Several European governments criticized Kroes for being inflexible in applying competition regulations, given the current global financial crisis.

The past six months have shown state aid control plays a key role in tackling the challenges of the economic crisis in a coordinated way across Europe", the commissioner said on Wednesday, as quoted by NewsIn.

Kroes recently said that banks that received state aid should slim down and return to their core business.

The EU official also said that banks still have problems stemming from the toxic assets, but the European Union will not be able to support them forever.

The International Monetary Fund has estimated that banks worldwide are probably burdened with more than USD 2300 billion in toxic assets.

Since the financial crisis began in September 2008, EU governments have rushed to shore up their national banks with capital injections and guarantees.

The EC is open to the idea of nationalization, but only if such measures are temporary, Kroes emphasized.

The statements of the EU official come as toxic assets accumulated by banks may reach USD 4000 billion dollars, according to new estimates to be published by the IMF, according to Times Online.

Banks and insurers whose toxic assets currently amount to USD 1290 billion, are facing increasing losses as the recession is worsening, which are compounding the losses from high risk mortgage loans.

The new forecasts of the IMF, which could be revised by the end of the month, will be a harsh blow for the governments which have already injected billions in the banking system.